Loss of heterozygosity (LOH) of loci on chromosome 18q occurs in a majority of colorectal cancers. The DPC4/SMAD4 gene, lying in close proximity to the DCC gene at 18q21.1, was recently identified as a candidate tumor suppressor for the genesis of pancreatic cancer as well as a predisposing gene for Juvenile Polyposis Syndrome (JPS). The gene product functions as a cytoplasmic mediator in the signaling pathway of transforming growth factor beta (TGF-beta). To investigate the potential role of DPC4/SMAD4 gene in colorectal cancers, we examined 73 tumors of clinical stages II or III from Japanese patients, for LOH at 18q21 and also for subtle mutations anywhere within the coding region of DPC4/SMAD4. LOH was identified in 50 (78%) of the 64 tumors that were informative for polymorphic markers in the region. Somatic mutations were identified in seven of those tumors: two frameshift mutations, a 1-bp deletion (326 del T) in exon 8 and a 1-bp insertion (50-51 ins A) in exon 1; two nonsense mutations, Arg445Ter in exon 10 and Glu538Ter in exon 11; and three missense mutations, Asn129Lys in exon 2, Tyr95Asn in exon 2, and Asp355Glu in exon 8. Three of the seven mutations were observed in the mad homology 1 (MH1) domain encoded by exons 1 and 2. In all of the tumors carrying intragenic mutations of one allele, LOH analysis had shown that the other allele was missing. The results demonstrated that inactivation of both alleles of the DPC4/SMAD4 gene occurs in a substantial proportion of advanced colorectal cancers, and that the DPC4/SMAD4 gene probably exerts a tumor-suppressor effect for colorectal carcinogenesis that fulfills the criterion of the two-hit concept proposed by Knudson [A.G. Knudson, Hereditary cancer, oncogenes, and anti-oncogenes, Cancer Res. 45 (1985) 1437-1443.].