Immunodeficient mice are increasingly used to assay human hematopoietic repopulating cells as well as leukemia-initiating cells. One method commonly used to isolate these rare cells is to sort cells stained with fluorochrome-conjugated antibodies into fractions, then transplant the different fractions into immunodeficient mice to test their repopulating ability. The antibodies are generally treated as being neutral in terms of their effects on the experiment. Human repopulating cells are thought to express CD34 and lack CD38. Here we present evidence that anti-CD38 antibodies have a profound inhibitory effect on engraftment of cord blood and leukemia cells. We show that this effect is Fc-mediated and can be overcome by treating mice with immunosuppressive antibodies. When this inhibitory effect is prevented, we demonstrate that the CD34⁺CD38⁺ fraction of certain acute myeloid leukemia samples contains all, or at least most, leukemia-initiating cell capacity. This study highlights the potential pitfall of antibody-mediated clearance of repopulating cells and is important for any groups working with this model. More importantly, the work suggests that there is greater variation in the phenotypes of leukemia-initiating cells than previously suggested.