Different clones of myeloid leukemic cells can be induced to differentiate to mature macrophages or granulocytes by different normal hematopoietic regulatory proteins. The present experiments with recombinant IL-1 alpha and recombinant IL-1 beta show that, (a) that there are clones of myeloid leukemic cells which can be induced to differentiate to mature cells by the myeloid cell differentiation-inducing protein MGI-2 and can also be induced to differentiate to mature macrophages and granulocytes by both types of IL-1; (b) this IL-1-induced differentiation is mediated by endogenous production of differentiation-inducing protein MGI-2; (c) IL-1 and MGI-2 induce production of GM-CSF in these leukemic cells; and (d) IL-1 also induces cell differentiation and production of MGI-2 and GM-CSF in normal myeloid precursor cells. The results indicate that IL-1 induces differentiation indirectly.