To study the origin and differentiation of natural killer (NK) cells, we developed an assay for the transplantable precursor of NK(YAC-1) cells present in the bone marrow. Mice were depleted of endogenous NK(YAC-1) cells by injection of anti-asialo GM1 antibody, followed by lethal whole body irradiation. Normal syngeneic bone marrow cells were transplanted into such pretreated mice. Regeneration of NK(YAC-1) activity in the recipient mice was monitored by two different assays: the ability of spleen cells to lyse YAC-1 cells in vitro and the ability to clear i.v. injected, 125IUdR-labeled YAC-1 cells from the lungs. With both assays, a dose-response relationship between the number of bone marrow cells injected and the degree of NK(YAC-1) activity generated could be demonstrated. However, the lung clearance assay appeared superior because the NK regeneration could be detected earlier and with lower numbers of injected marrow cells. With this assay, several characteristics of the NK precursors and their differentiation could be defined. 1) The generation of mature, lytic NK cells from their transplantable precursor requires an intact "marrow microenvironment" in the recipient mice, because differentiation failed to occur in mice rendered osteopetrotic by estradiol treatment. 2) The NK(YAC-1) precursors lack the surface antigens (NK-2.1, asialo GM1, Qa-5, Thy-1) that are characteristically seen on mature NK cells. 3) The NK-precursors could be eliminated from the bone marrow with anti-Qa-2 or anti-H-2 antisera + complement, indicating that these two antigens are expressed on the precursors. The relationship between NK(YAC-1) precursors and multipotent myeloid stem cells (CFU-S) was investigated by utilizing W/Wv and Sl/Sld mutant mice. Bone marrow cells of W/Wv anemic mice, although markedly deficient in CFU-S, have a normal frequency of NK(YAC-1) precursors. Sl/Sld mice that lack a suitable microenvironment for the development of CFU-S allowed normal differentiation of NK(YAC-1) precursors when transplanted with normal bone marrow cells. Together, these data suggest that multipotent myeloid progenitor cells, as defined by the CFU-S assay, and the NK(YAC-1) precursors are not closely related.