An atmosphere of 80 vol per cent nitrous oxide and 20 vol per cent oxygen produced erythropoietic and leukopoietic depression in rats in the first two days of a six-day exposure. The depression was rapidly reversed by return to room air.56Fe and21C-thymidinc distribution studies indicate that hematologic depression occurs at the hematopoietic stem cell or an alternate progenitor cell level. The diminished erythropoietic response to erythropoietin of rats breathing nitrous oxide provides further evidence for this contention. Lymphocytes were relatively resistant to nitrous oxide. Electron spin resonance (ESR) measurements revealed increased free radicals in the liver, whereas levels in the spleen and marrow were too low to measure. Fasting produced similar changes. When animals exposed to nitrous oxide were fasted the free radicals in the liver decreased to levels lower than those in fasted control animals and paralleled the hematopoietic changes. These results suggest that nitrous oxide acts at the level of the hematopoictic stem cell to arrest hematopoicsis, an effect which is rapidly reversible with return to room air. No definite causal relationship between ESR changes and the hematologic changes induced by nitrous oxide could be established.