The inhibitory effect by hairy cell conditioned medium (HCCM) on the growth of granulocyte and erythrocyte colony forming cells was studied in vitro. The percent inhibition of CFU-C formation by HCCM from four hairy cell leukemia (HCL) patients ranged from 36% to 76%, while no inhibition was observed with conditioned medium (CM) obtained from three B-cell chronic lymphocytic leukemia (B-CLL) patients nor from two normal controls. HCCM inhibited specially the growth of rG-CSF responding stem cells. The hairy cell-derived colony inhibitory factor from HCCM was nondialyzable, fairly stable to heat treatment, and trypsin sensitive. Its maximal inhibitory activity against granulopoiesis was observed in the fractions of 5,000 to 6,000 daltons. Moreover HCCM inhibited CFU-E colony formation but not BFU-E. These results indicate that hairy cells produce a factor that inhibits granulopoiesis and erythropoiesis in vitro. This factor may play a role in neutropenia and anemia observed in HCL.