Hematopoietic stem cell differentiation occurs in direct proximity to osteoblasts within the bone marrow cavity. Despite this striking affiliation, surprisingly little is known about the precise cellular and molecular impact of osteoblasts on the bone marrow microenvironment. Recently, we showed that human osteoblasts produce a variety of cytokine mRNAs including granulocyte colony-stimulating factor, granulocyte-macrophage colony-stimulating factor, and interleukin-6. We examined here the ability of osteoblasts to support the development of hematopoietic colonies from progenitors as well the ability to maintain long-term culture-initiating cells (LTC-IC) in vitro. Examination of the hematopoietic cells recovered after 2 weeks of culture showed that osteoblasts support the maintenance of immature hematopoietic phenotypes. In methylcellulose assays, osteoblasts stimulate the development of hematopoietic colonies to a level at least 10-fold over controls from progenitor cells. Using limiting dilutional bone marrow cultures, we observed an activity produced by osteoblasts resulting in an threefold to fourfold expansion of human LTC-IC and progenitor cells in vitro. Thus, the presence of hematopoietic stem cells in close proximity to endosteal surfaces in vivo may be due in part to a requirement for osteoblast-derived products.