Dysmorphic marrow morphology and bone marrow failure are common in AIDS patients, but the mechanism of HIV-1 effects on blood cell production is unclear. Experiments to test the susceptibility of hematopoietic progenitor cells to HIV-1 infection have led to conflicting results. We found that hematopoietic colony formation by burst-forming units-erythroid and CFU-GM was equivalently inhibited by both active and heat-inactivated, noninfectious virus. Inhibition was dependent on the presence of macrophages and was not observed in cultures derived from highly enriched CD34+ cells. We hypothesized that TNF-alpha, produced by mononuclear phagocytes after contact with HIV-1 or gp120 and itself a potent suppressor of hematopoiesis, might mediate this effect. The addition of anti-TNF-alpha neutralizing Abs to marrow cultures abrogated inhibition by gp120 or virus. In contrast, neutralizing Abs to Il-4, IFN-alpha, and TGF-beta failed to improve colony formation. TNF-alpha was released from blood monocytes and marrow mononuclear cells stimulated by gp120. TNF-alpha is increased in the blood of patients with late stage AIDS and may mediate many of the symptoms of the disease. Our data do not support a requirement of direct infection of hematopoietic progenitor cells by HIV-1 for the inhibition of hematopoiesis in vitro. We propose instead an indirect mechanism of viral suppression of hematopoiesis as a result of TNF-alpha induction by virus or viral envelope glycoprotein. The importance of local TNF-alpha production in patients' marrow is amenable to clinical testing.