Polycythemia vera (PV) is a myeloproliferative disorder arising in a multipotent hematopoietic stem cell. The pathogenesis of PV remains poorly understood; however, the biologic hallmark of this disease is the presence of erythropoietin (Epo)-independent colony formation (endogenous erythroid colony [EEC]) and cytokine hypersensitivity. We have developed a simple liquid culture from CD34+ cells to study PV erythroid differentiation. PV erythroid differentiation was characterized in this culture system by two types of abnormalities: 1) an increased proliferation of progenitors in response to cytokines, associated with strict cytokine dependency for preventing apoptosis; and 2) Epo-independent terminal erythroid differentiation in the presence of stem cell factor and interleukin-3 as evidenced by the acquisition of glycophorin A. The level of Epo-independent terminal differentiation correlates in PV patients with the number of EEC. Epo-independent terminal differentiation as well as normal Epo-induced differentiation were repressed by inhibitors of JAK2 (AG490), PI3K (LY294002), and the Src family kinases (PP2). In contrast, an inhibitor of the ERK/MAP kinase pathway (PD98059) had no effect on Epo-independent terminal differentiation. These signaling abnormalities were not mediated by a decreased expression or activity of the membrane tyrosine phosphatase CD45, which dephosphorylates JAK2 and Src family kinases. This study demonstrates that early steps of PV erythroid differentiation are strictly cytokine dependent. In contrast, late erythroid differentiation is an Epo-independent phenomenon that is mediated by signaling pathways identical to those in Epo-induced differentiation.