A new agar culture system to clone specifically acute nonlymphocytic leukemia (ANLL) is described, which consists of two phases: an initial liquid phase in the presence of PHA-stimulated lymphocyte conditioned medium (PHA-LCM) and a semi-solid phase. By preincubation of leukemic cells with PHA-LCM in a liquid phase, leukemic cells were found to be more sensitive to forming colonies and clusters in agar medium. In addition, this PHA-two step assay could eliminate colony formation by T cell progenitors. The leukemic origin of the colonies was proven by electron-microscopic analysis, which demonstrated the presence of nuclear blebs and abnormal perinuclear fibril formation. Morphological studies also indicated myeloid differentiation of the cells in the leukemic colonies, although considerable variation was observed among patients. The wide range of linearity between the number of cells plated and the number of colonies grown permits quantitative assay of colony-forming leukemic cells (L-CFU). This assay should be valuable for studies of chemotherapy, growth regulation, and differentiation of L-CFU.