Fusion of transplanted stem cells and host cells has been proposed as a major mechanism for the generation of hepatocytes, Purkinje neurons, and cardiomyocytes. However, the mechanism of cell fusion has not been precisely defined. Furthermore, the consequence of cell fusion remains unclear. We have previously shown that adult peripheral blood CD34-positive cells injected into severe combined immune deficiency (SCID) mice can transform into cardiomyocytes, endothelial cells, and smooth muscle cells following experimentally induced myocardial infarction and that most of the newly formed cardiomyocytes result from cell fusion. We therefore undertook this study to define the mechanism and consequences of cell fusion. Here we show that hypoxia and cytokines increase fusion of human peripheral blood CD34-positive cells and murine cardiomyocytes in vitro by up to 7-fold, and this is blocked by anti-41 or anti-vascular cell adhesion molecule (VCAM)-1. In vivo, fusion of progenitor cells and cardiomyocytes can also be blocked by anti-41 or anti-VCAM-1, but not by anti-vascular endothelial growth factor. On the other hand, generation of human-derived endothelial cells is blocked by anti-vascular endothelial growth factor but not by anti-41 antibodies. Two months following transplant, a high percentage of fused cells expressed cyclin B1 and incorporated bromodeoxyuridine. Thus, hematopoietic progenitor cell and cardiomyocyte fusion is mediated by 41/VCAM-1 interaction, leading to cell cycle reentry and cellular proliferation.