Previous studies suggested that the SH2-containing inositol-5-phosphatase (SHIP) may play a tumor suppressor-like function in BCR-ABL-mediated leukemogenesis. To investigate this possibility, we first developed a new assay for quantitating transplantable multilineage leukemia-initiating cells (L-ICs) in hematopoietic stem cell (HSC)-enriched mouse bone marrow (BM) cells transduced with a BCR-ABL-GFP (green fluorescent protein) retrovirus. The frequency of L-ICs (1 of 430 Sca-1+lin- cells) was 7-fold lower than the frequency of HSCs in the Sca-1+lin- subset transduced with a control virus (1 of 65 cells). Forced BCRABL expression was also accompanied by a loss of regular HSC activity consistent with the acquisition of an increased probability of differentiation. Interestingly, the frequency and in vivo behavior of wild-type (+/+) and SHIP-/- L-ICs were indistinguishable, and in vitro, Sca-1+lin- BCR-ABL-transduced SHIP-/- cells showed a modestly reduced factor independence. Comparison of different populations of cells from patients with chronic myeloid leukemia (CML) in chronic phase and normal human BM showed that the reduced expression of full-length SHIP proteins seen in the more mature (CD34-lin+) leukemic cells is not mirrored in the more primitive (CD34+lin-) leukemic cells. Thus, SHIP expression appears to be differently altered in the early and late stages of differentiation of BCR-ABL-transformed cells, underscoring the importance of the cellular context in which its mechanistic effects are analyzed.