The bone marrow provides a protective environment for acute myeloid leukemia (AML) cells that often allows leukemic stem cells to survive standard chemotherapeutic regimens. Targeting these leukemic stem cells within the bone marrow is critical for preventing relapse. We recently demonstrated that SDF-1, a chemokine abundant in the bone marrow, induces apoptosis in AML cell lines and in patient samples expressing high levels of its receptor, CXCR4. Here we show that a subset of osteoblast lineage cells within the bone marrow can protect AML cells from undergoing apoptosis in response to the SDF-1 naturally present in that location. In co-culture systems, osteoblasts at various stages of differentiation protected AML cell lines and patient isolates from SDF-1-induced apoptosis. The differentiation of the osteoblast cell lines, MC3T3 and W-20-17, mediated this protection via a cell contact-independent mechanism. In contrast, bone marrow-derived mesenchymal cells, the precursors of osteoblasts, induced apoptosis in AML cells via a CXCR4-dependent mechanism and failed to protect AML cells from exogenously added SDF-1. These results indicate that osteoblasts in the process of differentiation potently inhibit the SDF-1-driven apoptotic pathway of CXCR4-expressing AML cells residing in the bone marrow. Drugs targeting this protective mechanism could potentially provide a new approach to treating AML by enhancing the SDF-1-induced apoptosis of AML cells residing within the bone marrow microenvironment. J. Cell. Biochem. 115: 1128–1137, 2014. © 2013 Wiley Periodicals, Inc.