Currently the most successful methods for culturing human hematopoietic cells employ some form of perfused bioreactor system. However, these systems do not permit the clonal outgrowth of single progenitor cells. Therefore, we have investigated the use of alginate-poly-L-lysine microencapsulation of human bone marrow, combined with rapid medium exchange, as a system that may overcome this limitation for the purpose of studying the kinetics of progenitor cell growth. We report that a 12 to 24-fold multilineage expansion of adult human bone marrow cells was achieved in about 16 to 19 days with this system and that visually identifiable colonies within the capsules were responsible for the increase in cell number. The colonies that represented the majority of cell growth originated from cells that appeared to be present in a frequency of about 1 in 4000 in the encapsulated cell population. These colonies were predominantly granulocytic and contained greater than 40,000 cells each. Large erythroid colonies were also present in the capsules, and they often contained over 10,000 cells each. Time profiles of the erythroid progenitor cell density over time were obtained. Burst-forming units erythroid (BFU-E) peaked around day 5, and the number of morphologically identifiable erythroid cells (erythroblasts through reticulocytes) peaked on day 12. We also report the existence of a critical inoculum density and how growth was improved with the use of conditioned medium derived from a microcapsule culture initiated above the critical inoculum density. Taken together, these results suggest that microencapsulation of human hematopoietic cells allows for outgrowth of progenitor, and possible preprogenitor, cells and could serve as a novel culture system for monitoring the growth and differentiation kinetics of these cells.