The leukemias induced by the Friend polycythemia virus and other leukemogenic retroviruses have previously not been transplantable until weeks or months after virus inoculation. Because tumor-specific immune mechanisms persist in both irradiated and nude mice, it has not been possible to determine if this result is due to rejection of cells already immortalized by retrovirus infection, or reflects an inherent limitation in the proliferative capacity and malignancy of these “preleukemic” cells. To clarify these issues, we have transplanted virus-infected bone marrow into mouse fetuses that are immunologically immature and thus incapable of graft rejection. We report here that within days of virus inoculation, transplantable cells capable of disease progression in certain fetal hosts can be detected with this technique. These results demonstrate that cells with the capacity for extensive leukemic proliferation arise very early in Friend virus- induced disease. However, successful transplantation was seen only in genetically anemic recipients (Wx/Wv), which are deficient in hematopoietic stem cells, and not in their normal littermates. Thus, in accord with recent in vitro observations, this in vivo data suggests that normal hematopoietic cells, independent of immune mechanisms, can suppress the malignant progression of transformed cells.