Regulation of erythropoietin production by the kidneys is central to the control of erythropoiesis. Uncertainty about the identity of the renal cells involved has been a major obstacle to understanding this mechanism. We have used sequence from the mouse erythropoietin locus to direct expression of a marker gene, SV40 T antigen, to these cells in transgenic mice. The transgenic constructs contained an oligonucleotide marker (Epo-M) or SV40 sequence (Epo-TAg) in the 5' untranslated region of the mouse erythropoietin gene, flanked on each side by 9 and 7.5 kb of DNA from the mouse erythropoietin locus. Anemia-inducible expression of Epo-M and Epo-TAg was observed in the kidney. In one of thirteen lines, homologous integration of Epo-TAg into the mouse erythropoietin locus occurred. In transgenic mice bearing Epo-TAg at homologous and heterologous insertion sites, renal expression was restricted to a population of cells in the interstitium of the cortex and outer medulla. Immunohistochemical characterization by light and electron microscopy shows that these are the fibroblast-like type I interstitial cells.