Local production of the granulocyte and macrophage regulator, colony-stimulating factor (CSF), within the mouse bone marrow cavity was assessed by determining the capacity of marrow cells or the bone shaft to release or produce active material in liquid cultures. Assays for colony-stimulating activity were performed in agar cultures of mouse bone marrow cells. Following flushing of femoral marrow cells, with or without trypsinization, less than 5% of total marrow cells remained in the bones. However, media conditioned by such bones from adult mice had eight to 20 times the total colony-stimulating activity of media conditioned by the entire extruded marrow cell population. The difference was more marked in femurs from neonatal mice. This activity of both bone and marrow cells was radioresistant. During regeneration following wholebody irradiation, marrow cell activity remained constant, but a significant rise in the capacity of shaft-related cells to conditioned medium occurred simultaneously with the onset of regeneration of granulocytic and monocytic progenitor cells. Local production of CSF by nonhematopoietic cells in the marrow appears to be a significant factor in regulating granulopoiesis and monocyte formation.