This study aimed to evaluate the ability of the health food supplement Cordyceps sinensis (CS) to ameliorate suppressive effects of chemotherapy on bone marrow function as a model for cancer treatment. Mice were treated with Taxol (17 mg/kg body wt) one day before oral administration of a hot-water extract of CS (50 mg/kg daily) that was given daily for 3 weeks. White blood cell counts in peripheral blood of mice receiving Taxol were at 50% of normal levels on day 28 but had recovered completely in mice treated with CS. In vitro assays showed that CS enhanced the colony-forming ability of both granulocyte macrophage colony forming unit (GM-CFU) and osteogenic cells from bone marrow preparations and promoted the differentiation of bone marrow mesenchymal stromal cells into adipocytes, alkaline phosphatase-positive osteoblasts, and bone tissue. This result could be attributed to enhanced expression of Cbfa1 (core binding factor a) and BMP-2 (bone morphogenetic protein) with concurrent suppression of ODF (osteoclast differentiation factor/RANK [receptor activator of NF-kappaB]) ligand. In summary, CS enhances recovery of mice from leukopenia caused by Taxol treatment. It appears to do so by protecting both hematopoietic progenitor cells directly and the bone marrow stem cell niche through its effects on osteoblast differentiation.