In order to establish diagnostic criteria for hypocellular acute leukemia (HL), we have reviewed 32 cases selected on the basis of hypothetical 40% or less cellularity, by focusing on morphology, immunophenotype, karyotype and response to low dose Ara-C (LDAC) regimen and compared them with 40 cases of myelodysplastic syndrome (MDS) and 66 cases of overt acute myeloid leukemia (AML). The onset age ranged from 44 to 75 years (median 67 years). Bone marrow (BM) cellularity ranged from 12.4 to 39.8% (mean 29.8%) in HL, being significantly lower than in MDS (mean 80.7%) or AML (mean 86.4%) (P < 0.001). All reviewed cases characteristically showed smoldering clinical course, bi- or pancytopenia with rare leukemic blasts in the peripheral blood (PB), proliferation of type I leukemic blasts in the BM and markedly reduced background hematopoietic cells with some dysplastic changes in 12/32 cases (37.50/6). Blast percentage (blast %) in the BM ranged from 38.2 to 93.7% (mean 57.3%) in all nucleated cells (ANC). Although a considerable number of cases had blasts with negative or very low myeloperoxidase activity, immunophenotyping revealed that the leukemic blasts in HL had only myeloid markers. Karyotyping revealed non-random chromosome abnormalities in 30% of cases analyzed, which were considerably different from those seen in MDS. With LDAC regimen, a significantly higher CR rate (13/20 cases: 65.0%) was gained in HL than in RAEB/RAEB-t (0%) and overt AML in the elderly cases (27.3%) (P < 0.05). In CR, most cases showed recovery to normocellular BM with an apparent normalization of PB parameters. However, 12 CR cases relapsed 4-12 months later; most of which again showed hypocellular BM. These results indicate that HL is a distinct subtype of AML characterized by slow but distinct proliferation of immature myeloid blasts and by unique hematological features distinct from MDS or overt AML in the elderly. We propose the following diagnostic criteria: (1) pancytopenia with rare appearance of blasts in PB; (2) less than 40% BM hypocellularity; (3) more than 30% blasts in BM-ANC; and (4) myeloid phenotypes of leukemic blasts by MPO staining and/or immunophenotyping.