Circulating mononuclear cells from a patient developing severe aplastic anemia during the course of non-A, non-B hepatitis were found to be virtually entirely composed of in vivo activated suppressor T cells (Ia+T8+). These cells were used to establish a new permanent cell line, termed SMAA, by using phytohemagglutinin, Ebstein-Barr virus-transformed irradiated B cells, allogeneic irradiated peripheral blood mononuclear cells, and recombinant interleukin 2 to investigate the relationship of aplastic anemia-derived circulating T cells to bone marrow failure. SMAA cells, now in continuous culture for more than 9 mo, were shown to inhibit proliferation of purified myeloid progenitors and their differentiation into early and late appearing neutrophil and eosinophil colonies by 90%, whereas monocyte colonies were much less affected. Similarly, growth of erythroid colonies and bursts was almost completely inhibited, as was anti-mu-induced B cell proliferation and lectin-induced T cell proliferation. This inhibition of hematopoiesis was mediated by the release of a soluble factor that was sensitive to acid (pH 2), heat (56 degrees C), and trypsin. Monoclonal and polyclonal antibodies to interferon-gamma could abrogate the inhibitory effects of SMAA supernatant, but more than 10(4) neutralizing U/ml had to be added. The effects of SMAA could be duplicated by adding 10(4) U/ml of purified recombinant interferon-gamma to colony and proliferation assays. The concentration of interferon-gamma in SMAA supernatant was estimated to be greater than 3 X 10(3) National Institutes of Health reference U/ml by immunoradiometric assay. These results demonstrate that some patients with aplastic anemia have circulating T cells that are capable of prolonged in vitro secretion of interferon-gamma causing severe inhibition of in vitro hematopoiesis, and these cells can be expanded into permanent lines for studies on their regulatory properties.