Progression of B-lymphocyte development in the bone marrow of postnatal mammals is marked by progressive rearrangement and expression of immunoglobulin (Ig) heavy- and light-chain genes. Following productive VHDJH gene rearrangement in the Ig heavy-chain gene complex, mu-heavy chain is the first Ig gene product expressed in cells committed to the B-lymphoid differentiation pathway. Interleukin (IL)-7 has been shown to stimulate proliferation of pre-B cells following c mu expression and this proliferative stimulus is potentiated by kit ligand (KL). However, it appears that neither of these cytokines contributes to differentiation of pro-B cells or initiation of expression of Ig gene products. We previously demonstrated that differentiation of pro-B cells and expression of mu-heavy chain is stimulated by either bone marrow stromal cell line S17 or cell-free supernatants from that line. This biological activity was attributed to molecules with an apparent M(r) of less than 10 Kd and approximately 40 to 60 Kd. We now report that this biological activity resides with stromal cell-derived insulin- like growth factor-I (IGF-I). Recombinant IGF-I stimulated the expression of cytoplasmic mu-heavy chain in short-term bone marrow cultures and this stimulus was abrogated in the presence of anti-IGF-I antibody. We also demonstrate that either anti-IGF-I antibody or pretreatment of S17 cells with antisense oligonucleotide for IGF-I abrogated the pro-B cell differentiation activity of S17 stromal cell supernatants. Although IGF-I did not directly stimulate proliferation of B-lineage cells, like KL, it potentiated the proliferative stimulus provided by IL-7. Taken together, these data strongly suggest that IGF- I produced by bone marrow stromal cells in the hematopoietic microenvironment plays a key role in regulating primary B lymphopoiesis.