The HEXIM1 protein, in association with 7SK snRNA, binds and inhibits the kinase activity of P-TEFb (CDK9/cyclin T). P-TEFb activity is crucial for efficient transcription elongation of viral and cellular genes. HEXIM1 was originally isolated as a protein up-regulated by hexamethylene bisacetamide (HMBA), a prototypical inducer of differentiation. To determine the causative role of HEXIM1 during cell differentiation we analyzed the biochemical and functional consequences of HEXIM1 protein levels in several in vitro differentiation systems. We found that HEXIM1 mRNA and protein levels are up-regulated during differentiation of murine erythroleukemia cells upon treatment with HMBA or DMSO. Stimulation of HEXIM1 is not restricted to hematopoietic cells, as induction of phenotypic differentiation of neuroblastoma cells by retinoic acid results in up-regulation of HEXIM1. Moreover, ectopic expression of HEXIM1 causes growth inhibition and promotes neuronal differentiation. These findings highlight a crucial role of HEXIM1 protein during cell differentiation.