Retroviral-mediated delivery of the P140K mutant O(6)-methylguanine-DNA methyltransferase (MGMT(P140K)) into hematopoietic stem cells (HSC) has been proposed as a means to protect against dose-limiting myelosuppressive toxicity ensuing from chemotherapy combining O(6)-alkylating agents (e.g., temozolomide) with pseudosubstrate inhibitors (such as O(6)-benzylguanine) of endogenous MGMT. Because detoxification of O(6)-alkylguanine adducts by MGMT is stoichiometric, it has been suggested that higher levels of MGMT will afford better protection to gene-modified HSC. However, accomplishing this goal would potentially be in conflict with current efforts in the gene therapy field, which aim to incorporate weaker enhancer elements to avoid insertional mutagenesis. Using a panel of self-inactivating gamma-retroviral vectors that express a range of MGMT(P140K) activity, we show that MGMT(P140K) expression by weaker cellular promoter/enhancers is sufficient for in vivo protection/selection following treatment with O(6)-benzylguanine/temozolomide. Conversely, the highest level of MGMT(P140K) activity did not promote efficient in vivo protection despite mediating detoxification of O(6)-alkylguanine adducts. Moreover, very high expression of MGMT(P140K) was associated with a competitive repopulation defect in HSC. Mechanistically, we show a defect in cellular proliferation associated with elevated expression of MGMT(P140K), but not wild-type MGMT. This proliferation defect correlated with increased localization of MGMT(P140K) to the nucleus/chromatin. These data show that very high expression of MGMT(P140K) has a deleterious effect on cellular proliferation, engraftment, and chemoprotection. These studies have direct translational relevance to ongoing clinical gene therapy studies using MGMT(P140K), whereas the novel mechanistic findings are relevant to the basic understanding of DNA repair by MGMT.