The immunomodulatory drug lenalidomide induces 82% complete cytogenetic remissions in patients with myelodysplastic syndrome (MDS) and 5q31 deletion. Lenalidomide has multiple effects, but the causal mechanisms of action are unknown. In this study we assessed the direct effect of lenalidomide on hematopoietic cells from eight MDS patients with del(5)(q31) and from five healthy controls. Lenalidomide titrated up to 500 μM caused no growth inhibition of mononuclear cells from healthy controls. Selected CD34+ hematopoietic stem cells were then cultured with or without 10 μM of lenalidomide in a 14-day model for pure erythroblast differentiation in a medium containing IL-3, IL-6, and SCF, and with addition of Epo during the second week. Cell count and viability was monitored regularly, and FISH and FACS analyses were performed at day 0, 7, and 14. The median proportion of 5q- cells by FISH at day 7 was 98% (range 86–99), dropping to 88% (range 35–98) at day 14 due to a variable outgrowth of cytogenetically normal cells. Day 7 cells, the majority still being 5q-, were used for gene expression analyses. In erythroblast cultures with cells from healthy controls, lenalidomide had no inhibitory effect on fold increase of cell counts (P=0.92). However, in cultures with cells from 5q- patients, the clone with 5q deletion showed significant inhibition of fold increase at day 14 (P=0.009), while the cytogenetically normal progenitors were not inhibited (P=0.83). Gene expression profiling was performed using Affymetrix Human Genome U133 Plus 2.0 Arrays. A group of genes was found whose expression was affected by the addition of lenalidomide to the cultures of both normal erythroblasts and 5q- erythroblasts. Furthermore, lenalidomide decreased the proportion of cells expressing late erythroid markers on FACS analysis at day 14. We conclude that lenalidomide selectively inhibits in vitro growth of 5q- hematopoietic stem cells, while not affecting growth of cytogenetically normal cells from MDS patients with 5q deletion or from healthy controls. In addition, we see that lenalidomide affects cell differentiation and induces changes in gene expression.