We identified diminished levels of the natural inhibitor of neutrophil elastase (NE), secretory leukocyte protease inhibitor (SLPI), in myeloid cells and plasma of patients with severe congenital neutropenia (CN). We further found that downregulation of SLPI in CD34(+) bone marrow (BM) hematopoietic progenitors from healthy individuals resulted in markedly reduced in vitro myeloid differentiation accompanied by cell-cycle arrest and elevated apoptosis. Reciprocal regulation of SLPI by NE is well documented, and we previously demonstrated diminished NE levels in CN patients. Here, we found that transduction of myeloid cells with wild-type NE or treatment with exogenous NE increased SLPI messenger RNA and protein levels, whereas transduction of mutant forms of NE or inhibition of NE resulted in downregulation of SLPI. An analysis of the mechanisms underlying the diminished myeloid differentiation caused by reduced SLPI levels revealed that downregulation of SLPI with short hairpin RNA (shRNA) upregulated nuclear factor κB levels and reduced phospho-extracellular signal-regulated kinase (ERK1/2)-mediated phosphorylation and activation of the transcription factor lymphoid enhancer-binding factor-1 (LEF-1). Notably, microarray analyses revealed severe defects in signaling cascades regulating the cell cycle, including c-Myc-downstream signaling, in myeloid cells transduced with SLPI shRNA. Taken together, these results indicate that SLPI controls the proliferation, differentiation, and cell cycle of myeloid cells.