Newborn sheep inoculated with phytohemagglutinin (PHA)-treated short-term cultures of lymphocytes from cattle infected with bovine leukemia virus (BLV) or with a BLV-infected long-term culture of bovine leukemic lymphocytes became persistently infected with BLV. Fifty percent or more of the sheep died with histologically confirmed lymphosarcomas. Cytogenetic studies of representative cases demonstrated that the tumors did not result from the progressive growth of neoplastic lymphocytes in the inoculum but rather from the neoplastic transformation of the recipient's lymphoid cells. Neither BLV infection nor lymphosarcoma was observed in control uninoculated sheep or in sheep given injections of PHA-treated cultures of lymphocytes from BLV-free cows. The virus recovered from the tumorous sheep was indistinguishable from BLV morphologically, antigenically, and biologically, and its reverse transcriptase had the same cation preference and immunologic properties as the BLV enzyme. Persistent BLV infection and lymphosarcoma were also observed in a group of sheep inoculated neonatally with BLV-containing cell-free culture supernatants. These results extend previous observations on the high susceptibility of sheep to BLV infection and provide definitive evidence that BLV is a tumor-inducing virus.