Megakaryocytes and erythroid cells are thought to derive from a common progenitor during hematopoietic differentiation. Although a number of transcriptional regulators are important for this process, they do not explain the bipotential result. We now show by gain- and loss-of-function studies that erythroid Krüppel-like factor (EKLF), a transcription factor whose role in erythroid gene regulation is well established, plays an unexpected directive role in the megakaryocyte lineage. EKLF inhibits the formation of megakaryocytes while at the same time stimulating erythroid differentiation. Quantitative examination of expression during hematopoiesis shows that, unlike genes whose presence is required for establishment of both lineages, EKLF is uniquely down-regulated in megakaryocytes after formation of the megakaryocyte-erythroid progenitor. Expression profiling and molecular analyses support these observations and suggest that megakaryocytic inhibition is achieved, at least in part, by EKLF repression of Fli-1 message levels.