Despite the remarkable progress achieved in the treatment of leukemias over the last several years, many problems (multidrug resistance [MDR], cellular heterogeneity, heterogeneous molecular abnormalities, karyotypic instability, and lack of selective action of antineoplastic agents) still remain. The recent progress in tumor molecular biology has revealed that leukemias are likely to arise from disruption of differentiation of early hematopoietic progenitors that fail to give birth to cell lineage restricted phenotypes. Evidence supporting such mechanisms has been derived from studying bone marrow leukemiogenesis and analyzing differentiation of leukemic cell lines in culture that serve as models of erythroleukemic (murine erythroleukemia [MEL] and human leukemia [K562] cells) and myeloid (human promyelocytic leukemia [HL-60] cells) cell maturation. This paper reviews the current concepts of differentiation, the chemical/pharmacological inducing agents developed thus far, and the mechanisms involved in initiation of leukemic cell differentiation. Emphasis was given on commitment and the cell lineage transcriptional factors as key regulators of terminal differentiation as well as on membrane-mediated events and signaling pathways involved in hematopoietic cell differentiation. The developmental program of MEL cells was presented in considerable depth. It is quite remarkable that the erythrocytic maturation of these cells is orchestrated into specific subprograms and gene expression patterns, suggesting that leukemic cell differentiation represents a highly coordinated set of events that lead to irreversible growth arrest and expression of cell lineage restricted phenotypes. In MEL and other leukemic cells, differentiation appears to be accompanied by differentiation-dependent apoptosis (DDA), an event that can be exploited chemotherapeutically. The mechanisms by which the chemical inducers promote differentiation of leukemic cells have been discussed.