Gene targeting experiments have demonstrated that the transcription factor SCL is essential for primitive and definitive hematopoiesis in the mouse. To study the functional properties of hematopoietic cells expressing SCL, we have generated mutant mice (SCL^lacZ/w) in which the Escherichia coli lacZ reporter gene has been “knocked in” to the SCL locus, thereby linking β-galactosidase expression to transcription from the SCL promoter. Bone marrow cells from heterozygous SCL^lacZ/w mice were sorted into fractions expressing high, intermediate and low levels of β-galactosidase (designated lacZ^high, lacZ^int, and lacZ^neg). Cells that were lacZ^high or lacZ^int were enriched for day 12 spleen colony-forming units and myeloid and erythroid colony-forming cells (CFCs). These fractions included >99% of the erythroid and >90% of the myeloid CFCs. Culture of sorted bone marrow populations on stromal cells secreting interleukin-7 or in fetal thymic organ cultures showed that B and T lymphoid progenitors were also present in the lacZ^high and lacZ^int fractions. These data provide a functional correlation between SCL expression and colony-forming ability in immature hematopoietic cells. Our data also suggested that expression of SCL was transient and confined to hematopoietic stem and/or progenitor cells, because the differentiated progeny of most lineages (except the erythroid) were β-galactosidase-negative.