Culturing mouse bone marrow in the presence of catalase dramatically alters hematopoiesis. Granulocyte output is initially increased 4- to 5-fold. This increase is transient and granulocyte production declines as immature (Sca-1+/LIN-) cells accumulate. One third of these immature cells have a phenotype (Sca-1+/c-Kit+) characteristic of hematopoietic stem cells. At 2 to 3 weeks there are greater than 200-fold more Sca-1+/c-Kit+/LIN- cells in treated cultures than in controls. This population contains functional stem cells with both short-term and long-term bone marrow repopulating activity. In addition to myeloid progenitors, this Sca-1+/LIN- population contains a large number of cells that express CD31 and CD34 and have an active Tie-2 promoter, indicating that they are in the endothelial lineage. After 3 to 4 weeks hematopoiesis in treated cultures wanes but if catalase is removed, hematopoiesis resumes. After 7 to 10 days the cultures are indistinguishable from untreated controls. Thus, protected from H2O2, hematopoietic progenitors multiply and become quiescent. This sequence resembles in vivo development in normal marrow. These results make it clear that peroxide-sensitive regulatory mechanisms play an important role in controlling hematopoiesis ex vivo and presumably in vivo as well. They also indicate that manipulation of the peroxide levels can be used to enhance the growth of hematopoietic stem cells in culture.