Several murine marrow stromal cells were established from murine bone marrow cultures. Stromal cell lines transfected with a tumor-inducing polyoma virus middle T antigen (MTAg) were inoculated into nude mice subcutaneously. KUSA-MTAg cells, one of these cell lines, led to the rapid local development of bone marrow consisting of trilineage hemantopoietic cells and bone; other cell lines produced spindle cell sarcoma or hemangiosarcoma. These results suggested that a single stromal cell line, KUSA-MTAg cells, may induce hematopoietic stem cells or early progenitors of three lineages of hematopoietic cells in vivo. Interestingly, untransfected KUSA cells expressed three new mesenchymal phenotypes, osteocytes, adipocytes, and myotubes, after treatment with 5-azacytidine. © 1992 Wiley-Liss, Inc.