The ability to control the differentiation of adult hematopoietic stem cells (HSCs) would promote development of new cell-based therapies to treat multiple degenerative diseases. Systemic injection of NaIO₃ was used to ablate the retinal pigment epithelial (RPE) layer in C57Bl6 mice and initiate neural retinal degeneration. HSCs infected ex vivo with lentiviral vector expressing the RPE-specific gene RPE65 restored a functional RPE layer, with typical RPE phenotype including coexpression of another RPE-specific marker, CRALBP, and photoreceptor outer segment phagocytosis. Retinal degeneration was prevented and visual function, as measured by electroretinography (ERG), was restored to levels similar to that found in normal animals. None of the controls (no HSCs, HSCs alone and HSCs infected with lentiviral vector expressing LacZ) showed these effects. In vitro gene array studies demonstrated that infection of HSC with RPE65 increased adenylate cyclase mRNA. In vitro exposure of HSCs to a pharmacological agonist of adenylate cyclase also led to in vitro differentiation of HSCs to RPE-like cells expressing pigment granules and the RPE-specific marker, CRALBP. Our data confirm that expression of the cell-specific gene RPE65 promoted fate determination of HSCs toward RPE for targeted tissue repair, and did so in part by activation of adenylate cyclase signaling pathways. Expression by HSCs of single genes unique to a differentiated cell may represent a novel experimental paradigm to influence HSC plasticity, force selective differentiation, and ultimately lead to identification of pharmacological alternatives to viral gene delivery.