We transduced osteoprogenitor cells with recombinant retrovirus and analyzed proviral integration patterns into chromosomal DNA to detect for the first time the clonal and cellular fate of osteoprogenitor-derived progeny cells. Metaphyseal bone cells and diaphyseal stromal cells were isolated from the distal femurs of young rats, transduced with the vM5neolacZ recombinant retrovirus, and selected in the neomycin analog, G418. Following surgical marrow ablation of a femur in one leg of mature rats, retroviral-transduced metaphyseal or diaphyseal cells were injected into the ablated site. These rats were killed 5-6 days later. Metaphyseal and diaphyseal cells were isolated from distal femurs, selected in G418, and stained for beta-galactosidase (beta-gal+). The number and clonal origin of transduced progenitor cells were determined. High numbers of beta-galactosidase colonies with an osteoblast phenotype were obtained following metaphyseal transplants and detected in 100% of metaphyseal and none of diaphyseal specimens. In contrast, beta-galactosidase colonies derived from diaphyseal transplants were detected in 50% of specimens in both the metaphysis and diaphysis, and the absolute number of progenitor cell colonies was 60-fold less than metaphyseal transplants. Provirus was only detected in the ablated bones and not in the contralateral bone or other tissues. Proviral integration fragment analysis showed a single integration site for recovered metaphyseal cell clones, consistent with their origination from a common single progenitor. This is one of the first demonstrations of successful transplantation of clonal osteoprogenitors to their site of origin in bone. It may be possible to use these cells to target genes to bone for therapeutic use in skeletal and hematopoietic diseases.