Human marrow-derived mesenchymal stem cells (MSC), which have the potential to differentiate into mesenchymal tissues, such as bone, cartilage, adipose and bone marrow stroma, were transduced with a retroviral vector carrying the simian virus 40 large T antigen, hygromycin-resistant gene and herpes simplex virus thymidine kinase gene, that can be excised by Cre/loxP site-specific recombination. This resulted in establishment of an MSC cell line, HMSC-1, which retained original surface characteristics and differentiation potential, and exhibited a higher proliferative capacity than parental cells. HMSC-1 expressed mRNAs of BMP-4, Jagged-1, and SCF that are known to promote hematopoiesis. Human CB CD34+ hematopoietic progenitor cells (HPC) cultured on a layer of HMSC-1 cells showed high expansion of CD34+CD38- immature HPC, capable of reconstituting human hematopoiesis in non-obese diabetic/severe combined immunodeficient disease (NOD/SCID) mice. This cell line may be of value for developing strategies for ex vivo expansion of human HPC.