Hematotoxicity following chronic benzene exposure has been recognized for over a century, although the mechanism remains unknown. We describe a novel form of bone marrow dysplasia in 23 workers exposed to high concentrations of benzene. Distinguishing features of benzene-induced dysplasia include: marked dyserythropoiesis, eosinophilic dysplasia and abnormal cytoplasmic granulation of neutrophilic precursors. Hematophagocytosis, stromal degeneration and bone marrow hypoplasia are also seen. Severe bone marrow dysplasia is frequently accompanied by clonal T cell expansion and alterations in T lymphocyte subsets. No clonal cytogenetic abnormalities were observed. These results suggest that autoimmune-mediated bone marrow injury is an early or predisposing event in the pathogenesis of benzene-induced persistent hematopoietic disease.