The balance between Th1 and Th2 cells is critical for homeostasis of the immune system. Th1 cells can also regulate hematopoietic progenitor cell homeostasis by production of oncostatin M. Here we show that Th1 cell products, but not those of Th2 cells, caused a rapid expansion of lineage(-)Sca-1(+)C-kit(+) (LSK) cells in vivo and in vitro. Among Th1 cytokines, interferon-gamma (IFNgamma) was found to play a major role in this expansion by activating the expression of Sca-1 in lineage(-)Sca-1(-)C-kit(+) cells. This process was dependent on IFNgammaR1 signaling and the STAT1 pathway. Furthermore, those IFNgamma-induced LSK cells had a higher proliferation potential than control LSK cells. In addition, while the overall production of colony-forming units in bone marrow was decreased after IFNgamma treatment, the sorted LSK cells could give rise to a higher yield of colony-forming units. Finally, the IFNgamma-induced hematopoiesis was biased toward the differentiation of myeloid lineages. Therefore, our findings demonstrated a novel role of IFNgamma in activating hematopoietic progenitor cells and provide a new insight into the clinical application of interferon.