The fusion of cells of complementary mating types to produce giant cells has been shown to be the critical event to induce macrocyst formation in Dictyostelium discoideum. We have examined the way in which giant cells use diffusible factors to influence the developmental mode of nearby cells using an experimental design in which NC4 cells are allowed to develop on a dialysis membrane above a suspension of giant cells. We have observed that giant cells are able to inhibit independent aggregation and stream formation in the upper cells and become the dominant aggregation centers. In addition giant cells are able to redirect local amoeba away from the fruiting-body and toward the macrocyst mode of development. We show that these effects are mediated by diffusible factors of under 2,000 MW. and discuss possible mechanisms of action.