Functionally active natural killer (NK) cells with the ability to lyse 51Cr-labeled YAC-1 lymphoma target cells are no longer detectable by 1 wk of culture in cultured marrow cells harvested from Dexter-type long-term marrow cultures (LMC). Interferon, which enhances NK cell-mediated target cell lysis, fails to induce NK activity from LMC cells even at high effector to target cell ratios. However, such LMC cells, when placed in secondary cultures in the presence of Con A-splenic leukocyte-conditioned medium (spleen-CM) generated a population of cells with NK activity within 1 wk. Kinetic studies showed that the generation of NK activity was not due simply to proliferation of a few surviving NK cells, but suggested derivation from NK precursors through clonal expansion and functional maturation. This NK activity was further shown to be associated with a subpopulation of cells bearing surface Thy-1, Ly-5, and NK-1 as well as asialo-GM1 antigens but lacking Ly-1 antigen. The expression of Ly-2 antigen, however, was variable. Electron microscopy studies of isolated asialo-GM1-positive cells showed a uniform lymphoblastoid morphology with large cytoplasmic to nuclear ratios and prominent electron dense cytoplasmic granules characteristic of large granular lymphocytes. In support of the NK nature of such cultured cells was the ability of anti-asialo-GM1 and complement to abrogate, and of interferon to augment, target cell lysis. Isolated cell lines also showed target selectivity similar to NK cells. The implications of the studies on further analysis of the nature of NK precursors is discussed.