The lungs and mediastinal and bronchial lymph nodes from 26 sheep with ovine pulmonary adenomatosis (OPA) were examined. Microscopically, the tumour was disseminated throughout the lungs and displayed acinar or papillary growth. The neoplastic cells were cuboidal or columnar with clear cytoplasm and a low mitotic rate. Retrovirus antigen (Jaagsiekte Sheep Retrovirus Capsid Protein, JSRV CA) was demonstrated in the cytoplasm of tumour cells in the lung and lymph nodes by immunohistochemistry. The neoplastic cells had more diffuse and intense expression of pulmonary surfactant protein-A (SP-A) compared with the expression of SP-B or SP-C. SP-A and SP-B expression was localized to the apical cytoplasm of the neoplastic cells, whereas SP-C was most strongly expressed in the perinuclear area of the tumour cells. In the lungs of two sheep, low numbers of tumour cells expressed Clara cell secretory protein (CCSP). The nuclei of the neoplastic epithelial cells and of the germinal centre lymphocytes within the peribronchiolar lymphoid tissue expressed the proliferating cell nuclear antigen (PCNA). CD3 + T lymphocytes infiltrated the pulmonary tissue and surrounded the neoplastic foci. The results of this study demonstrate that JSRV continues to replicate in neoplastic cells after they have been transformed, and that the neoplastic cells produce pulmonary surfactant proteins. A local T-cell response occurs within affected lungs.