Mutant larvae for the Drosophila gene lethal giant larva (lgl) develop neoplastic tumors in imaginal discs. However, lgl mutant clones do not form tumors when surrounded by wild-type tissue, suggesting the existence of a tumor-suppressing mechanism. We have investigated the tumorigenic potential of lgl mutant cells by generating wing compartments that are entirely mutant for lgl and also inducing clones of various genetic combinations of lgl − cells. We find that lgl − compartments can grow indefinitely but lgl − clones are eliminated by cell competition. lgl mutant cells may form tumors if they acquire constitutive activity of the Ras pathway ( lgl − UAS-ras V12 ), which confers proliferation advantage through inhibition of the Hippo pathway. Yet, the majority of lgl − UAS-ras V12 clones are eliminated in spite of their high proliferation rate. The formation of a tumor requires in addition the formation of a microenvironment that allows mutant cells to evade cell competition.