VGF, a polypeptide encoded by vaccinia virus, shares amino acid sequence homology and functional properties with cellular growth factors EGF and TGF-alpha. The availability of a VGF minus (VGF-) virus mutant has enabled us to examine the role of VGF in the replication of virus in vitro and in vivo. Studies in vitro with A431 cells (high EGF receptor density) showed that VGF+ wild-type virus induced the rapid formation of a focus of infection (not a plaque) which could be blocked by a monoclonal antibody to the EGF receptor. In vivo experiments with chicken embryos indicated that VGF+ virus stimulated the growth of ectodermal and entodermal cells of the chorioallantoic membrane. At early times, the majority of proliferating cells contained no detectable virus antigen, indicating that cell growth preceded infection and was a consequence of VGF secretion. Relative to VGF- virus, VGF+ virus produced lesions which contained more proliferating cells, more virus antigen, and increased amounts of infectious progeny. Secretion of VGF thus explains the conundrum of a nontransforming, strongly cytopathic virus inducing a hyperplastic cell response.