Iron balance is regulated by the rate of erythropoiesis and the size of the iron stores. Anemia that accompanies infection, inflammation, and cancer (anemia of chronic disease) features normal or increased iron stores, although patients may have functional iron deficiency, namely, an imbalance between iron requirements of the erythroid marrow and the actual supply. The proportion of hypochromic red cells and the hemoglobin content of reticulocytes are direct indicators of functional iron deficiency. Biochemical markers, especially the soluble transferrin receptor/log ferritin ratio (ferritin index), are useful indicators of the iron supply to erythropoiesis. The relationship between functional iron deficiency (reticulocyte hemoglobin content) and iron supply to erythropoiesis (ferritin index) can be described in a diagnostic plot. In normoproliferative and hypoproliferative erythropoiesis, the plot allows the differentiation of classic iron deficiency from anemia of chronic disease and the combined state of functional iron deficiency with anemia of chronic disease. The therapeutic implications of the plot are to differentiate patients into those who should be administered iron supplements, epoetin, or a combination of epoetin and iron. In patients receiving epoetin therapy, the plot is an important tool for monitoring erythropoietic activity, functional iron deficiency, and adequate iron stores for new red cell production. Enhanced erythropoiesis is reflected quantitatively by the ferritin index vector. A transgression of the 1.5 (3.2) cut-off value for the ferritin index indicates that extra doses of iron need to be administered to increase the body's iron stores. A lack of increase or a reticulocyte hemoglobin content below 28 picograms indicates functional iron deficiency. The diagnostic plot is a model for differentiating iron-deficient states and predicting those patients who will respond to epoetin therapy.