Fetal alcohol syndrome and alcohol related birth defects represent a spectrum of disorders that can result from the consumption of alcohol during pregnancy. Previous studies from this laboratory have shown that alcohol exposure in utero adversely affects hematopoietic progenitors in the bone marrow. Neonatal mice that were exposed in utero to alcohol showed a marked delay in B lymphocyte development. Recent studies have focused on an oligopotential progenitor cell, with the phenotype of HSA(lo)CD43(lo)Lin(-), which yields both B cells and myeloid lineage cells at a high frequency when cultured in vitro with stromal cells and the appropriate cytokines. However, these progenitor cells isolated from neonatal offspring of alcohol fed dams showed a significant decrease in the frequency of B cell formation following in vitro culture. In order to understand the mechanism underlying this defect we examined the expression of key transcription factors (early B cell factor, EBF, and Pax5) in this progenitor pool. Here, we report that >95% of HSA(lo)CD43(lo)Lin(-) cells express EBF and 5% express Pax5. Following liquid culture in the presence of IL-7, these progenitor cells respond by up-regulating Pax5 and the surface expression of CD19 indicating that the cells have committed to the B lineage. By contrast 75% of HSA(lo)CD43(lo)Lin(-) cells isolated from the bone marrow of neonatal animals exposed in utero to alcohol expressed EBF but at a level that was less than 25% the level of cells isolated from control animals. Furthermore, these alcohol-exposed progenitor cells failed to up-regulate Pax5 in response to IL-7 indicating a greatly reduced capacity to expand and differentiate to B lineage cells in liquid cultures. However, the HSA(lo)CD43(lo)Lin(-) cells isolated from the alcohol exposed animals retained the capacity to differentiate to myeloid lineage cells. These results suggest that the interference with the sequential expression of transcription factors in early progenitor cells by in utero alcohol exposure is a potential mechanism for the observed decrease in B lymphocytes in neonatal mice.