In the murine myelomonocytic leukemia WEHI-3B, proviral insertions have induced expression of the Hox-2.4 homeobox gene and the gene for the myeloid growth factor interleukin 3 (IL-3). To assess their potential oncogenic role, normal bone marrow cells were infected with retroviruses bearing the genes for IL-3 or IL-3 plus Hox-2.4. Unlike the IL-3 virus, the IL-3/Hox-2.4 virus was highly leukemogenic. Infected cells expressing both genes exhibited retarded differentiation in vitro, generated myelomonocytic cell lines, and provoked a rapid, transplantable myeloid leukemia in vivo. The oncogenic action of Hox-2.4 appears to derive from its ability to impede the IL-3-driven terminal differentiation of myeloid cells. The results suggest that homeobox genes can regulate key differentiation processes such as self-renewal capacity and that their inappropriate expression can be oncogenic.