Murine embryonic stem (ES) cells have been a useful model system for the study of various aspects of hematopoietic differentiation. Because we had observed a sharp peak of expression of the receptor tyrosine phosphatase gamma (Ptp gamma) gene between 14 and 18 days of ES-derived embryoid body differentiation, we investigated the effect of perturbation of expression of the Ptp gamma gene on ES cell differentiation, first by analyzing the effect of Ptp gamma overexpression. The murine full-length Ptp gamma cDNA in an expression vector was transfected into ES-D3 cells and stably transfected clones were isolated. Ptp gamma was expressed as an approximately 230-kD cell surface protein, and differentiating ES clones that overexpressed Ptp gamma gave rise to a normal number of hematopoietic colonies, approximately 1 CFU per 100 cells. There was, however, a significant increase of expression of early hematopoietic markers in colonies from Ptp gamma overexpressing ES cells. To confirm that the pertubation of hematopoietic differentiation was a result of Ptp gamma overexpression, we isolated ES stem cell clones expressing Ptp gamma antisense constructs and assayed embryoid bodies for the presence of hematopoietic precursors. We observed a complete absence of methylcellulose colonies, indicating absence of hematopoietic lineages. Results of these experiments point to an essential role for Ptp gamma in hematopoietic differentiation.