Interferon gamma (IFN-γ) has been reported to have both negative and positive activity on hematopoietic cells, adding complexity to the interpretation of its pleiotropic functions. We examined the effects of IFN-γ on murine hematopoietic stem cells (HSCs) and progenitors in vitro and in vivo by using mouse models. IFN-γ treatment expanded bone marrow (BM) c-Kit(+)Sca1(+)Lin(-) (KSL) cell number but reduced BM KLCD150(+) and KLCD150(+)CD48(-) cells. IFN-γ-expanded KSL cells engrafted poorly when tested by competitive repopulation in vivo. KSL, KLCD150(+), and KLCD150(+)CD48(-) cells from IFN-γ-treated animals all showed significant upregulation in Fas expression. When cocultured with activated T cells in vitro, KSL and KLCD150(+) cells from IFN-γ-treated donors showed increased apoptosis relative to those from untreated animals, and infusion of activated CD8 T cells into IFN-γ-injected animals in vivo led to partial elimination of KSL cells. Exposure of BM cells or KSL cells to IFN-γ increased expression of Fas, caspases, and related proapoptotic genes and decreased expression of Ets-1 and other hematopoietic genes. In mouse models of BM failure, mice genetically deficient in IFN-γ receptor expression showed attenuation of immune-mediated marrow destruction, whereas effector lymphocytes from IFN-γ-deficient donors were much less potent in initiating BM damage. We conclude that the activity of IFN-γ on murine hematopoiesis is context dependent. IFN-γ-augmented apoptotic gene expression facilitates destruction of HSCs and progenitors in the presence of activated cytotoxic T cells, as occurs in human BM failure.