To identify transcripts that distinguish malignant from benign thyroid disease serial analysis of gene expression (SAGE) profiles of papillary thyroid carcinoma and of normal thyroid are compared. Of the 21,000 tags analyzed, 204 tags are differentially expressed with statistical significance in the tumor. Thyroid tumor specificity of these transcripts is determined in silico using the tissue preferential expression (TPE) algorithm. TPE values demonstrate that 42 tags of the 204 are thyroid tumor specific. BC013035, a cDNA encoding a novel protein, is up-regulated from 0 to 24 tags in the thyroid tumor SAGE library. In a tissue panel of 30 thyroid tumors and 12 controls, it has an expression pattern similar to thyroid peroxidase, indicating possible involvement of BC013035 in thyroid differentiation. A tag coding for extracellular matrix protein 1 (ECM1) is absent in the normal thyroid SAGE library and present 55 times in the tumor. ECM1, a protein recently associated with angiogenesis and expressed in metastatic breast carcinoma, is up-regulated in 50% of all thyroid carcinoma and absent in normal controls and follicular adenoma. In conclusion, SAGE analysis and subsequent determination of TPE values facilitates the rapid distinction of genes specifically expressed in cancer tissues.