Human umbilical cord blood (CB) is being increasingly used both as an alternative to bone marrow to transplant children and for experimental insight into the ontogenic and maturational characteristics of blood cells. We studied the functional and phenotypic characteristics of CB natural killer (NK) cells because of the possibly important role such cells may play in a transplant setting and to gain insight into the little known ontogenic differences and maturational pathways of NK cells. It was found that CB NK lytic activity is usually deficient and that this deficiency cannot be fully explained by the presence of insufficient percentages of CD56+ cells. Although CD16+CD56+ and CD16-CD56+ NK cell subsets typical of adult peripheral blood (PB) are present, a significant population of CD16+CD56- cells also exists in CB. CB CD16+CD56- cells have little or no lytic capabilities; CB CD16+CD56+ cells vary in their lytic capabilities. Although a decreased ability to bind target cells may contribute to the deficient lytic activity of these CB NK cell subsets, studies suggest that other factors must also play a role. Short-term incubation with interleukin-2 (IL-2) or interleukin-12 (IL-12) substantially increases the lytic capabilities of CB NK cells, and long-term incubations induce lymphokine-activated killer (LAK) cell generation. Cell depletion experiments show that activated CD56+ NK cells are responsible for the lytic activity of CB LAK cells. Flow cytometric analysis reveals that during LAK cell generation, CB undergoes phenotypic changes similar to those of PB except that CD16+CD56- cells are still present.(ABSTRACT TRUNCATED AT 250 WORDS)