Earlier work demonstrated that an activated estrogen receptor (ER) is required for long-term self-renewal of c-ErbB-expressing avian erythroid progenitors. Here, we demonstrate that activation of the ER does not only arrest or retard differentiation of early progenitors but that it affects erythroid differentiation at all stages of erythroid maturation. A search for genes whose expression is affected by the ER showed that the 17beta-estradiol-activated receptor suppressed the differentiation-associated up-regulation of Gata-1, SCL-1, and globin genes in partially mature cells. In the same cells, the expression of carbonic anhydrase II (CAII) and histone H5 was enhanced. This led to premature expression of CAII, a possible explanation for the toxic effects of overexpressed ER. Repression specifically required the transactivation domain AF-2, but neither an intact DNA-binding domain (DBD) nor the AF-1 domain. The transcriptional activation of CAII, however, required both an intact AF-2 and a functional DBD. The requirement for the AF-2, but not the DBD, suggested that the ER may compete with other nuclear hormone receptors for transcriptional coactivators that bind AF-2, a domain well conserved within this family of transcription factors. We show, however, that this model does not apply for the most likely candidate, the avian thyroid hormone receptor.