The Wilms tumor gene 1 (WT1) encodes a zinc-finger-containing transcription factor highly expressed in immature hematopoietic progenitor cells. Overexpression and presence of somatic mutations in acute leukemia indicate a role for WT1 in the pathogenesis of leukemia. CD34+ progenitor cells were transduced with one splice variant of human WT1 without the KTS insert in the zinc-finger domain, WT1(+/-), and with a deleted mutant of WT1 lacking the entire zinc-finger region, WT1(delZ), thus incapable of binding DNA. We show that inhibition of erythroid colony formation and differentiation is absolutely dependent on the DNA-binding zinc-finger domain of WT1. Unexpectedly, however, WT1(delZ) was equally effective as wild type protein in the reduction of myeloid clonogenic growth as well as in stimulation of myeloid differentiation, as judged by the expression of cell surface CD11b. Expression of neither WT1(+/-) nor WT1(delZ) upregulated mRNA for the cdk inhibitor p21(Waf1/Cip1) or p27Kip1. Our results demonstrate that WT1 affects proliferation and differentiation in erythroid and myeloid cells by different molecular mechanisms, and suggest that mutations affecting the zinc-finger domain of WT1 could interfere with normal differentiation in the pathogenesis of leukemia.