Contact with bone marrow stromal cells maintains normal and leukemic hematopoietic progenitors in an undifferentiated state. Recently, stromal contact has been shown to diminish the yield of megakaryocytes in cultures of primary human hematopoietic stem cells. This inhibition may explain the poor megakaryocytic engraftment frequently observed after bone marrow transplantation. In the current study, stromal co-culture is shown to render K562 cells refractory to megakaryocytic induction. This stromal inhibition correlated with the selective down-regulation in K562 cells of protein kinase C-epsilon (PKC-epsilon), which has recently been implicated in regulation of megakaryocytic lineage commitment. In addition, the stromal inhibition correlated with inactivation of the ERK/MAPK pathway, which has also been implicated in promoting megakaryocytic development. Forced expression of PKC-epsilon by retroviral transduction was insufficient to reverse the stromal blockade of ERK/MAPK signaling or of megakaryocytic induction. Thus stromal interruption of ERK/MAPK signaling occurred independently of PKC-epsilon levels and correlated more closely with megakaryocytic blockade. These findings provide potential mechanisms for stromal inhibition of hematopoietic differentiation and possibly for the poor megakaryocytic engraftment seen after bone marrow transplantation.