The availability of cloned lines of bone marrow stromal cells could facilitate the analysis of their role in hemopoietic cell development. The 266AD cell line was isolated from a colony of lipid-accumulating bone marrow cells growing in a collagen gel. 266AD cells have subsequently been maintained by passage in tissue culture plastic flasks about every 10 days for greater than 10 mo. Subconfluent cultures of cells are fibroblast-appearing, but in confluent cell sheets, prominent foci of lipid-containing cells develop in both uncloned and four separate cloned cell lines. Supernatants from confluent cultures containing lipid-laden cells contain granulocyte-macrophage colony-stimulating activity (GM-CSA) for normal bone marrow cells and can induce differentiation of Abelson virus transformed murine promonocytic leukemia cells. 266AD cells were originally isolated in the presence of hydrocortisone, but hydrocortisone is not necessary for lipogenesis to occur. Growth of bone marrow cells in a collagen gel matrix provided a way to isolate stromal cells, and the 266AD cell line provides a means to examine the relationships between stromal cell lipogenesis and regulation of granulopoiesis.