PU.1 is a unique regulatory protein required for the generation of both the innate and the adaptive immune system. It functions exclusively in a cell-intrinsic manner to control the development of granulocytes, macrophages, and B and T lymphocytes. We demonstrate that mutation of the PU.1 gene causes a severe reduction in myeloid (granulocyte/macrophage) progenitors. PU.1 -/- myeloid progenitors can proliferate in vitro in response to the multilineage cytokines interleukin-3 (IL-3), IL-6 and stem cell factor but are unresponsive to the myeloid-specific cytokines granulocyte-macrophage colony-stimulating factor (GM-CSF), G-CSF and M-CSF. The failure of PU.1 -/- progenitors to respond to G-CSF is bypassed by transient signaling with IL-3. In the presence of IL-3 and G-CSF, PU.1 -/- progenitors can differentiate into granulocytic precursors containing myeloperoxidase-positive granules. Thus PU.1 is not essential for specification of granulocytic precursors, but is required for their further differentiation. The failure of PU.1 -/- progenitors to respond to M-CSF is due to lack of c-fms gene transcription. Transduction of c-fms into PU.1 -/- myeloid progenitors bypasses the block to M-CSF-dependent proliferation but does not induce detectable macrophage differentiation. Therefore, PU. 1 appears to be essential for specification of monocytic precursors. Importantly, retroviral transduction of PU.1 into mutant progenitors restores responsiveness to myeloid-specific cytokines and development of mature granulocytes and macrophages. Thus PU.1 controls myelopoiesis by regulating both proliferation and differentiation pathways.