Hematopoietic cell growth, differentiation, and commitment to a restricted lineage are guided by a set of cytokines acting exclusively on cells expressing the corresponding cytokine receptor. The macrophage colony stimulating factor (M-CSF, also termed CSF-1) and its cognate receptor, the tyrosine kinase c-Fms, are essential for monocyte and macrophage development. The underlying molecular mechanism, however, is poorly understood. Here we identified a novel Fms-interacting protein (FMIP, MW 78 kDa) which binds transiently via its N-terminal 144 residues to the cytoplasmic domain of activated Fms-molecules. Binding of FMIP was paralleled by rapid tyrosine phosphorylation within the binding domain which drastically reduced its ability to associate with Fms. Binding was specific as evidenced by co-immunoprecipitation and association with recombinant GST-Fms fusion proteins. No binding was observed with the tyrosine phosphorylated cytoplasmic domains of c-Kit, TrkA, c-Met, and the insulin receptor. The role of FMIP in hematopoietic differentiation was studied in the bipotential myeloid progenitor cell line, FDC-P1Mac11. Overexpression of FMIP prevented M-CSF induced macrophage differentiation. Instead, cells differentiated into granulocytes. Our data suggest that the level of FMIP expression could form a threshold that decides about differentiation either into macrophages or into granulocytes.