Telomere length must be tightly regulated in highly proliferative tissues, such as the lymphohematopoietic system. Under steady-state conditions, the levels and functionality of hematopoietic-committed or multipotent progenitors were not affected in late-generation telomerase-deficient mice (mTerc(-/-)) with critically short telomeres. Evaluation of self-renewal potential of mTerc(-/-) day-12 spleen colony-forming units demonstrated no alteration as compared with wildtype progenitors. However, the replating ability of mTerc(-/-) granulocyte-macrophage CFUs (CFU-GMs) was greatly reduced as compared with wildtype CFU-GMs, indicating a diminished capacity of late-generation mTerc(-/-) committed progenitors when forced to proliferate. Long-term bone marrow cultures of mTerc(-/-) bone marrow (BM) cells show a reduction in proliferative capacity; this defect can be mainly attributed to the hematopoietic, not to the stromal, mTerc(-/-) cells. In serial and competitive transplantations, mTerc(-/-) BM stem cells show reduced long-term repopulating capacity, concomitant with an increase in genetic instability compared with wildtype cells. Nevertheless, in competitive transplantations late-generation mTerc(-/-) precursors can occasionally overcome this proliferative impairment and reconstitute irradiated recipients. In summary, our results demonstrate that late-generation mTerc(-/-) BM cells with short telomeres, although exhibiting reduced proliferation ability and reduced long-term repopulating capacity, can still reconstitute myeloablated animals maintaining stem cell function.