The human monoblast leukemia line, U937, is growth-inhibited and induced to develop markers of mature monocytes by lymphokine preparations. Lymphokine is cytostatic and induces expression of Fc receptors in U937 and in myelomonocytic leukemic lines RC-2A and KG-1, but does not have these effects on T- and B-lymphocytic lines. In addition to previously described properties, including complement receptors, phagocytosis, and antibody-dependent cellular cytotoxicity (ADCC), Mac-1 and Mac-3 surface antigens defined by monoclonal antibodies are induced on U937 cells by lymphokine and phorbol ester. The Mac-1 surface component appears to have a regulatory role in differentiation of the monocyte lineage line, since antibodies to this antigen block the induction of Mac-3 antigen. The lymphokine activity was concentrated by salt precipitation and characterized by ion-exchange and size chromatography. Fractions of about 40,000 daltons were responsible for growth inhibition and induction of Fc receptors and Mac-1 antigen in U937 cells. However, ADCC was not induced in U937 by individual fractions of lymphokine, suggesting that this cytotoxic capacity may be regulated by a lymphokine of a different size, which is only effective after initial maturation steps. Since gamma-interferon is present on the 40K size range of lymphokine, the possibility that interferon is a differentiation modulator for the monoblast cells was investigated. Highly purified gamma-interferon (10(7) U/mg protein) at 10-300 U/ml inhibited growth and induced Fc receptors in U937 similar to the effect of lymphokine. The Fc-receptor-inducing activity of lymphokine was inhibited by a neutralizing monoclonal antibody to gamma-interferon, suggesting that this differentiation factor in lymphokine is gamma-interferon.