The process of erythropoiesis in the fetal liver and adult bone marrow is regulated by the hormone erythropoietin (Epo), which is produced in the kidney at low levels under homeostatic conditions. Defects in Epo production result in severe anemia; use of recombinant hormone has improved the lives of patients with renal failure or anemia because of bone marrow suppression. Deletion of the Epo gene in mice leads to embryonic lethality at days 13 to 15, coincident with the establishment of definitive (adult-type) erythropoiesis and underscoring the absolute necessity of Epo function in vivo. Epo has proven to be a successful pharmaceutical agent, one of the early triumphs of recombinant protein technology. Because of its clinical importance, a great deal of attention has focused on the molecular mechanisms of Epo-regulated erythropoiesis. This review highlights the basic concepts of Epo signal transduction within the hematopoietic system, the major site of Epo action in vivo.