Hematopoietic regulation is a complex but dynamic process regulated by intercellular and intracellular interactions within the bone marrow (BM) microenvironment. Through neurokinin-1 (NK-1) and NK-2 receptors, peptides (eg, substance P [SP]) encoded by the preprotachykinin-I gene mediate distinct hematopoietic effects. Cytokines, associated with hematopoietic stimulation, and SP regulate the expression of each other in BM mesenchymal and immune cells. Neutral endopeptidase (NEP) uses SP as a substrate to produce SP(1-4), which inhibits the proliferation of matured myeloid progenitor. This study determines whether the degradation of SP to SP(1-4) by endogenous NEP in BM stroma could be a feedback on hematopoietic stimulation by stem cell factor (SCF). SP(1-4) induced the production of transforming growth factor (TGF)-beta and tumor necrosis factor-alpha in BM stroma. TGF-beta production accounted for part of the inhibitory effects by SP(1-4) on the proliferation of early (granulocyte-macrophage colony-forming units) and late (long-term culture-initiating cells) hematopoietic progenitors. Enzyme-linked immunosorbent assays and/or protein-chip arrays indicated a timeline change of SP to SP(1-4) in BM stroma stimulated with SCF, which correlated with increase in NEP messenger RNA. Since SP and its fragment, SP(1-4), interact with the same receptor to mediate opposing hematopoietic effects, 2 interactive studies were done to understand the dual responses of NK-1: (1) a 3-dimensional molecular model of NK-1 and SP and (2) screening of a random dodecapeptide library for SP(1-4) interacting sites. The effects of SP(1-4) on hematopoietic progenitors and the timeline change of SP to SP(1-4), together with the 3-dimensional model, provide a partial explanation for the feedback on the stimulatory effects of SCF and SP on hematopoiesis.