Blood cells are derived from a multitiered system of progenitor stem cells that lose their capacity for proliferation and self-renewal as they continue along pathways of differentiation. Since these hematopoietic events can be readily monitored in vivo and in vitro in the mouse, we have utilized this system to examine altered cellular differentiation associated with 2,3,7,8-tetrachlorodibenzo-p-dioxin (TCDD) toxicity. Progenitor cells were suppressed following acute exposure of mice to TCDD at doses as low as 1.0 micrograms/kg body wt. In vitro studies demonstrated that myelotoxicity occurs by a direct inhibition of proliferating stem cells. Genetic studies indicated that the myelotoxic responses to TCDD, both in vivo and in vitro, segregate with the Ah locus. In addition, the in vitro myelotoxicity of various polyhalogenated aromatic hydrocarbon congeners correlated with their previously reported ability to induce hepatic microsomal enzyme activity and to bind to an intracellular receptor for TCDD. TCDD was also found to bind specifically to bone marrow cells from Ah-responsive, but not nonresponsive mice, indicating that bone marrow cells possess a specific receptor for TCDD. These data indicate that the myelotoxic response to TCDD is regulated by the Ah receptor present in the target tissue and demonstrates the utility of this system for examining the cellular and molecular events associated with the toxicity of polyhalogenated aromatic hydrocarbons, the prototype for which is TCDD.