In situ hybridization has been used to localize erythropoietin (EPO)-producing cells in murine kidney and liver. Peritubular interstitial cells were the only cell type that produced EPO in the kidney. The EPO-producing cells were primarily concentrated in the inner cortex but were also seen in the outer medulla and outer cortex. EPO-producing cells represented less than 10% of the total interstitial cell population. The number of EPO-producing cells per square centimeter of cortex directly correlated with the amount of renal EPO mRNA and varied in an inverse exponential manner with hematocrit. These results suggest that EPO is expressed in an all-or-none fashion in peritubular interstitial cells and that the oxygen carrying capacity of blood is the major regulator of renal EPO production. Peritubular interstitial cells were also identified as the renal source of human EPO in transgenic mice that expressed human EPO mRNA is a regulated fashion in the kidney. Transgenic mice exhibiting inducible supranormal liver expression of human EPO were used to identify EPO-producing cells in the liver. Hepatocytes surrounding central veins produced human EPO in these mice. Individual hepatocytes were able to modulate their production of human EPO depending upon the severity of anemia to which they were subjected. Two types of widely scattered cells produced EPO in severely anemic nontransgenic mice. Eighty percent of EPO-producing cells were hepatocytes and 20% were classified as being nonepithelial based on their nuclear morphology and location in venous sinusoids.