The stages of human natural killer (NK) cell differentiation are not well established. Culturing CD34+ progenitors with interleukin 7 (IL-7), IL-15, stem cell factor (SCF), FLT-3L, and murine fetal liver cell line (EL08.1D2), we identified 2 nonoverlapping subsets of differentiating CD56 + cells based on CD117 and CD94 (CD117highCD94- and CD117low/-CD94+ cells). Both populations expressed CD161 and NKp44, but differed with respect to NKp30, NKp46, NKG2A, NKG2C, NKG2D, CD8, CD16, and KIR. Only the CD117low/- CD94+ population displayed cytotoxicity and interferon-γ production. Both populations arose from a single CD34+CD38- Lin- cell and their percentages changed over time in a reciprocal fashion, with CD117 highCD94+cells predominating early and decreasing due to an increase of the CD117low/-CD94+ population. These 2 subsets represent distinct stages of NK-cell differentiation, since purified CD117high CD94- cells give rise to CD117 low/-CD94+ cells. The stromal cell line (EL08.1D2) facilitated the transition from CD117highCD94- to CD117low/-CD94+ via an intermediate phenotype (CD117 lowCD94low/-). EL08.1D2 also maintained the mature phenotype, preventing the reversion of CD117low/-CD94+ cells to the intermediate (CD117lowCD94low/-) phenotype. An analogous population of CD56+CD117highCD94- cells was found in cord blood. The identified stages of NK-cell differentiation provide evidence for coordinated acquisition of HLA-specific inhibitory receptors (ie, CD94/NKG2A) and function in developing human NK cells.