The introduction of genetic sequences into hematopoietic stem cells (HSC) has allowed study of HSC proliferation in vivo by proviral-sequence molecular analysis in the DNA of progeny. Analysis of HSC proliferation could be enhanced by development of a retroviral vector that encodes a reporter gene that allows sensitive detection of transduced cells. We developed a recombinant retrovirus vector encoding the reporter gene lacZ under the transcriptional control of the myeloproliferative sarcoma virus long-terminal repeat (LTR). Bone marrow cells from C3H mice were co-cultured on retrovirus producer cell lines and cultured for growth of colony-forming unit granulocyte/macrophage (CFU-GM) and high proliferative potential colony-forming cells (HPP-CFC) in semisolid media or were transplanted into irradiated recipients. In other experiments, recombinant retrovirus was injected in vivo into the liver of developing fetal rat pups, and circulating hematopoietic cells of the postnatal rats were analyzed for evidence of proviral integration and expression of beta-galactosidase. Expression of lacZ was detected in both CFU-GM and HPP-CFC that were cultured immediately following in vitro infection of mouse bone marrow. Beta-galactosidase activity from the retrovirus was also detected in both marrow cells isolated from reconstituted mice 22 weeks following transplantation as well as in blood cells of postnatal rats transduced in utero with the recombinant retrovirus. This strategy may be especially useful for characterizing proliferation of transduced populations of hematopoietic cells and in the development of protocols for somatic gene therapy.