We previously reported the isolation of a murine bone marrow derived stromal cell line, TC-1, and two sublines derived from this line. The monolayer of one subline, TC-1-C-3, directly supported the growth of nonadherent marrow cells in Dexter culture system for eight weeks. We report here the mechanism of the stromal cell effect on hemopoiesis in a long-term bone marrow culture system. When the hemopoietic blasts attach to the TC-1-C-3 cells, they are surrounded by the stromal cell cytoplasm within two hours and develop into cell clusters in a week. The developing hemopoietic cells show cell differentiation towards the granulocytic lineage. A key function of the epithelioid stromal cell, then, is to provide a 'niche' or 'envelope' for stem cells which supports long-term hemopoiesis in the Dexter culture system.