Kaposi's sarcoma (KS) is an AIDS-defining cancer caused by the KS-associated herpesvirus (KSHV). KS tumors are composed of KSHV-infected spindle cells of vascular origin with aberrant neovascularization and erythrocyte extravasation. KSHV genes expressed during both latent and lytic replicative cycles play important roles in viral oncogenesis. Animal models able to recapitulate both viral and host biological characteristics of KS are needed to elucidate oncogenic mechanisms, for developing targeted therapies, and to trace cellular components of KS ontogeny. Herein, we describe two new murine models of Kaposi's sarcoma. We found that murine bone marrow-derived cells, whether established in culture or isolated from fresh murine bone marrow, were infectable with rKSHV.219, formed KS-like tumors in immunocompromised mice and produced mature herpesvirus-like virions in vivo. Further, we show in vivo that the histone deacetylase (HDAC) inhibitor suberoylanilide hydroxamic acid (SAHA/Vorinostat) enhanced viral lytic reactivation. We propose that these novel models are ideal for studying both viral and host contributions to KSHV-induced oncogenesis as well as for testing virally-targeted antitumor strategies for the treatment of Kaposi's sarcoma. Furthermore, our isolation of bone marrow-derived cell populations containing a cell type that, when infected with KSHV, renders a tumorigenic KS-like spindle cell, should facilitate systematic identification of KS progenitor cells.