IL-1 inhibits erythropoiesis in vivo and in vitro. This inhibition was studied by comparing the effect of recombinant human IL-1 (rhIL-1) on highly purified CFU-erythroid (E) generated from peripheral blood burst-forming units-erythroid (BFU-E) (mean purity 44.4%) with its effect on unpurified marrow CFU-E (mean purity 0.36%). Colony formation by marrow CFU-E was significantly inhibited by rhIL-1, while colony formation by highly purified CFU-E was not inhibited. However, purified CFU-E colonies were inhibited by rhIL-1 in the presence of autologous T-lymphocytes, and also by cell-free conditioned medium prepared from T-lymphocytes stimulated by rhIL-1. This inhibitory effect was ablated by neutralizing antibodies to gamma interferon (IFN), but not by antibodies to human IL-1, tumor necrosis factor, or beta IFN. Colony formation by highly purified CFU-E was also inhibited by recombinant human gamma IFN (rh gamma IFN). IL-1 and gamma IFN play significant roles in the pathogenesis of the anemia of chronic disease. These studies indicate that rhIL-1 inhibits CFU-E colony formation by an indirect mechanism involving T-lymphocytes and requiring gamma IFN and that gamma IFN itself is most probably the direct mediator of this effect.