Mutations at the murine dominant white spotting (Kit^W) and steel (Mgf^Sl) loci, encoding c-Kit receptor kinase and its ligand respectively, exert developmental defects on hematopoietic cells, melanocytes, germ cells and interstitial cells of Cajal. The expression patterns of steel factor (SLF) observed in the skin and gonads suggest that SLF mediates a migratory or a chemotactic signal for c-Kit-expressing stem cells (melanocyte precursors and primordial germ cells). By targeting expression of SLF to epidermal keratinocytes in mice, we observed extended distribution of melanocytes in a number of sites including oral epithelium and footpads where neither melanocytes nor their precursors are normally detected. In addition, enlarged pigmented spots of Kit^W and other spotting mutant mice were observed in the presence of the SLF transgene. These results provide direct evidence that SLF stimulates migration of melanocytes in vivo. We also present data suggesting that SLF does not simply support survival and proliferation of melanocytes but also promotes differentiation of these cells. Unexpectedly, melanocyte stem cells independent of the c-Kit signal were maintained in the skin of the SLF transgenic mice. After the elimination of c-Kit-dependent melanoblasts by function-blocking anti-c-Kit antibody, these stem cells continued to proliferate and differentiate into mature melanocytes. These melanoblasts are able to migrate to cover most of the epidermis after several months. The SLF transgenic mice described in this report will be useful in the study of melanocyte biology.