The neomycin phosphotransferase (neo) gene is one of the most common marker genes used in gene transfer experimentation, but potential effects of neo gene expression in vivo have not been systematically investigated. Several early clinical retroviral gene transfer studies have suggested that neo gene expression could have deleterious effects on hematopoiesis, owing to a discrepancy between the level of neo-marked transduced marrow progenitor cells compared with mature circulating progeny cells posttransplantation (Brenner et al., 1993; Kohn et al., 1995; Brenner, 1996b). We examined the long-term in vivo repopulating ability of bone marrow from transgenic mice expressing neo from a strong constitutive promoter using a competitive repopulation assay. Different ratios of neo transgenic and wild-type congenic marrow cells were cotransplanted into W/Wv recipient mice. The percentages of blood cells containing the neo transgene in each group of recipient mice monitored for 4 months posttransplantation closely matched the input ratios of neo transgenic to congenic control marrow cells. Similar concordances of engraftment with input ratios of neo transgenic cells were also found in spleen, thymus, and whole marrow of recipient mice at 4 months posttransplantation. Analysis of the beta-hemoglobin phenotype (beta(single) for the neo transgenic and C57 control cells and beta(diffuse) for the congenic competitor HW80 cells) in recipients confirmed erythroid repopulation from neo transgenic marrow cells at levels matching the input ratios. We conclude that hematopoietic cells expressing neo had no engraftment or maturation defects detectable in vivo. These results suggest that the low-level contribution of vector-marked cells to circulating populations in clinical trials is not due to direct deleterious effects of neo gene expression on hematopoiesis.