We have developed a novel cotransplantation system in which gene- transduced human CD34+ progenitor cells are transplanted into immunodeficient (bnx) mice together with primary human bone marrow (BM) stromal cells engineered to produce human interleukin-3 (IL-3). The IL- 3-secreting stroma produced sustained circulating levels of human IL-3 for at least 4 months in the mice. The IL-3-secreting stroma, but not control stroma, supported human hematopoiesis from the cotransplanted human BM CD34+ progenitors for up to 9 months, such that an average of 6% of the hematopoietic cells removed from the mice were of human origin (human CD45+). Human multilineage progenitors were readily detected as colony-forming units from the mouse marrow over this time period. Retroviral-mediated transfer of the neomycin phosphotransferase gene or a human glucocerebrosidase cDNA into the human CD34+ progenitor cells was performed in vitro before cotransplantation. Human multilineage progenitors were recovered from the marrow of the mice 4 to 9 months later and were shown to contain the transduced genes. Mature human blood cells marked by vector DNA circulated in the murine peripheral blood throughout this time period. This xenograft system will be useful in the study of gene transduction of human hematopoietic stem cells, by tracing the development of individually marked BM stem cells into mature blood cells of different lineages.