Bone marrow transplantation is currently used in the treatment of a variety of neoplastic and nonneoplastic diseases. However, significant obstacles still limit the efficacy of this procedure. These include the occurrence of graft-versus-host disease, the failure of the marrow to engraft, the susceptibility of patients to opportunistic infections during the period of immunodeficiency after transplantation before full recovery of immune function, and finally, the recurrence of the cancer. Natural killer (NK) cells are lymphoid cells responsible for mediating a variety of immunologic and homeostatic functions. Initially described almost 20 years ago, the full range of functions carried out by these enigmatic cells continues to unfold. NK cells may be both beneficial and deleterious in bone marrow transplantation, depending on their genotype and activation status. Resting host-derived NK cells appear capable of mediating resistance to both autologous and allogeneic bone marrow cell grafts. At the other end of the spectrum, the transfer of activated NK cells of donor type appears to produce multiple beneficial effects during both syngeneic and allogeneic bone marrow transplantation. Here, we review and attempt to reconcile the literature concerning the basic biology of NK cells and their effects on hematopoiesis, both in vitro and in vivo. We also discuss the current issues in bone marrow transplantation and the potential role NK cells may play in determining the outcome of the marrow graft, the occurrence of graft-versus-host disease, and the generation of a graft-versus-tumor response when bone marrow transplantation is used for the treatment of cancer.