A new cell line, SUP-HD1, was established from the pleural effusion of a patient with nodular sclerosing Hodgkin's disease (NSHD). The SUP-HD1 cells had the characteristic morphology of Reed-Sternberg cells and contained acid phosphatase and nonspecific esterase. The cells lacked the Epstein-Barr virus (EBV) genome and reacted with monoclonal antibodies (MoAbs) against CD15 (Leu-M1), CD25 (Tac), CD71 (OKT9), Ki67, and HLA-Dr. However, the SUP-HD1 cells were nonreactive with MoAbs that specifically identify T lymphocytes, B lymphocytes, and macrophage/myeloid cells. Karyotype analysis of the cell line showed clonal abnormalities involving 1p13, 7p15, 8q22, and 11q23, chromosomal locations, at which breakpoints have been reported in HD. Southern blot analysis demonstrated rearrangement of the immunoglobulin heavy chain and kappa light chain genes as well as the gene for the beta chain of the T-cell receptor (TCR). Transcriptional analysis showed expression of RNAs for kappa light chain, interferon-gamma (IFN-gamma), and interleukin-2 receptor (IL-2R) but not IL-2. The SUP-HD1 cells lacked cytoplasmic and surface immunoglobulin heavy chain, but a small amount of cytoplasmic kappa light chain was detected. The presence of nuclear factor kappa B (NF kappa B), a B-lymphocyte-associated transcription factor, was demonstrated in stimulated and unstimulated cells. In addition, the SUP-HD1 cell line, produced IFN-gamma, a T-lymphocyte-associated lymphokine. Based on these data, the SUP-HD1 cells appear to be aberrant lymphocytes with characteristics of both activated B and T lymphocytes. Elaboration of lymphokines such as IFN-gamma by the malignant cells may represent one explanation for the unique clinical and pathologic features of HD.