Previously, we developed a simple Rat 6 (R6) cell system by which the inhibitory effects of non-cytotoxic chemicals can be assessed by focus formation assay upon transfection of ras oncogene to the host cells. Using this system, two well studied medicinal mushrooms Ganoderma lucidum and Tricholoma lobayense with anticancer potential were examined for their possible advert effects on cell transformation induced by ras oncogene. Results indicated that both species of mushrooms yielded strong inhibitory effects on ras-induced cell transformation. Further study on T.lobayense indicated that the DEAE-column-bound, polysaccharides (PS)-peptide enriched, but not the unbound fraction, showed strong inhibition in a dosage-dependent manner. Subsequent time course study revealed that the continued presence of the extract in the transfected cultures was required for a maximum inhibitory effect. At the same time, we also observed that significant levels of inhibition occurred even when the application of the extract was delayed until day 12 after transfection. Using a stable transformed cell line, R6/GFP-Ras expressing green fluorescent protein-ras fusion protein in a co-culture assay with normal R6 cells, we demonstrated that R6/GFP-Ras cells grew into green fluorescent foci with striking transforming morphology in the absence of extracts. However, in the presence of extracts, R6/GFP-Ras cells, in most cases, remained as small colonies compiled with only a few green fluorescent cells. Moreover, the inhibitory effect requires the presence of R6 cells. In our study, mushroom extracts have no effect on the growth of individually cultured normal and transformed R6 cells. It is noteworthy that the extracts do not affect the level, or the subcellular localization of the Ras protein. Collectively, the data strongly suggest that the inhibitory effect of the mushroom extracts is not due to a direct killing of the transformed cells, rather, it may be mediated through the surrounding normal R6. While the general understanding of the antitumor effect of PS and PSPC is mediated through the cytokines released by activated marcrophages and T-lymphocytes, our data may provide a novel alternative mechanism that the mushroom PS peptides may exert anticancer effect by targeting the ras-mediated signaling pathway.