We describe dendritic cell progenitors within the CD34+ stem cell compartment in neonatal cord blood and identify growth factors contributing to their differentiation. Granulocyte-macrophage colony-stimulating factor (GM-CSF), although mainly promoting the growth and differentiation of monocyte-macrophages (mono-m psi s), also induced the differentiation of cells with the distinctive morphological features of dendritic cells (DCs). Tumor necrosis factor (TNF) in combination with GM-CSF promoted further growth of both cell types but most notably increased the DC content. In situ analysis revealed that the cells exhibiting DC morphology were positive for class II major histocompatibility complex antigens but were CD14 negative, did not exhibit nonspecific esterase activity, and were nonphagocytic. Moreover, the mixed leukocyte reaction stimulatory capacity of cultures with the higher DC content was greater. TNF, interleukin-1 (IL-1), IL-6, or platelet-derived growth factor (PDGF) was inactive in promoting stem cell proliferation or DC morphology. IL-1 or PDGF synergized with GM-CSF to increase mono-m psi-associated cell proliferation but did not increase the DC content. The development of a common DC-monocyte precursor was suggested by the presence of colony-forming unit-like clusters containing mono-m psi s and DCs and one sharp proliferative peak. The loss of DC morphology after 21 days, coupled with increases in mono-m psi-associated markers and a constant number of viable cells, further suggests that DC morphology may fluctuate in culture or is a transient feature acquired by certain cells of the mono-m psi lineage.