The tissue-specific transcription factor GATA-1 is a key regulator of red blood cell differentiation. One seemingly contradictory aspect of GATA-1 function is that, while it is abundant in erythroid progenitor cells prior to the onset of overt differentiation, it does not significantly activate known GATA-1 target genes in those cells. To investigate the mechanisms underlying GATA-1 function during the transition from early to late erythropoiesis, we have examined its expression and activity in normal avian erythroid progenitor cells before and after induction of differentiation. In these primary progenitor cells, GATA-1 protein was predominantly located in the cytoplasm, while induction of differentiation caused its rapid relocalization to the nucleus, suggesting that nuclear translocation constitutes an important regulatory step in GATA-1 activation. As an alternative way of addressing the same question, we also ectopically expressed a GATA-1/estrogen receptor fusion protein (GATA-1/ER) in red blood cell progenitors, where nuclear translocation of, and transcriptional activation by, this hybrid factor are conditionally controlled by estrogen. We found that hormone-activated GATA-1/ER protein accelerated red blood cell differentiation, and concomitantly suppressed cell proliferation. These phenotypic effects were accompanied by a simultaneous suppression of c-myb and GATA-2 transcription, two genes thought to be involved in the proliferative capacity of hematopoietic progenitor cells. Thus, GATA-1 appears to promote differentiation in committed erythroid progenitor cells both by inducing differentiation-specific genes and by simultaneously suppressing genes involved in cell proliferation.