BALB- and Harvey-murine sarcoma viruses (MSV) comprise a family of retroviruses whose mouse- and rat-derived onc genes are closely related. These viruses induce sarcomas and erythroleukemias in susceptible animals. An in vitro colony assay that detects transformation of lymphoid cells by Abelson-murine leukemia virus was used to demonstrate that BALB- and Harvey-MSV transform a novel hematopoietic cell both in culture and in vivo. Bone marrow colony formation was sarcoma virus dependent, followed single-hit kinetics, and required the presence of mercaptoethanol in the agar medium. BALB- and Harvey-MSV-induced colonies could be established in culture as continuous cell lines that demonstrated unrestricted self-renewal capacity and leukemogenicity in vivo. The cells had a blast cell morphology and lacked detectable markers of mature cells within the myeloid or erythroid series. They also lacked detectable immunoglobulin mu chain or Thy-1 antigen, markers normally associated with committed cells of the B and T lymphoid lineages, respectively. However, the transformants contained very high levels of terminal deoxynucleotidyl transferase (TdT), an enzyme believed to be specific to early stages within the lymphoid differentiation pathway. This phenotype distinguishes these BALB- and Harvey-MSV transformants from any previously reported hematopoietic targets of transforming retroviruses, including the pre-B lymphoid cell transformed by Abelson-MuLV under identical assay conditions. These newly identified lymphoid progenitor cell transformants may provide an important means of studying early stages of lymphoid ontogeny and the possible role of TdT in lymphoid development.