CD34+ precursors in normal human bone marrow (BM) generate large numbers of dendritic cells alongside macrophages and granulocytic precursors when cultured for 12 to 14 days in c-kit ligand, granulocyte- macrophage colony-stimulating factor (GM-CSF), and tumor necrosis factor-alpha (TNF-alpha). This study reports an intermediate cell type that develops by day 6, and has the potential to differentiate into either macrophages or dendritic cells. When the d6 progeny are depleted of mature macrophages and residual CD34+ precursors, a discrete CD14+ HLA-DR+ population persists in addition to immunostimulatory CD14- HLA- DR() dendritic cells. Half of the CD14+ HLA-DR+ population is in cell cycle (Ki-67+), but colony-forming units (CFUs) are no longer detectable. The calls are c-fms+, but lack myeloperoxidase and nonspecific esterase. They also possess substantial phagocytic and allostimulatory activity. These post-CFU, CD14+ HLA-DR+ intermediates develop into typical macrophages when recultured in the absence of exogenous cytokines. M-CSF supports up to approximately 2.5-fold expansion of macrophage progeny. In contrast, the combination of GM-CSF and TNF-alpha supports quantitative differentiation into dendritic cells, lacking c-fms, CD14, and other macrophage properties, and expressing HLA-DR, CD1a, CD83, CD80, CD86, and potent allostimulatory activity. Therefore, normal CD34+ BM precursors can generate a post-CFU bipotential intermediate in the presence of c-kit ligand, GM-CSF, and TNF-alpha. This intermediate cell type will develop along the dendritic cell pathway when macrophages are removed and GM-CSF and TNF-alpha are provided. Alternatively, it can differentiate along a macrophage pathway when recultured with or without M-CSF.