The protein tyrosine kinase Fes is preferentially expressed in myeloid and endothelial cells and is believed to be involved in the development and function of these cell types. However, the precise mechanisms of action of Fes in these processes are largely unknown. To elucidate the biological role of Fes in myeloid cells, we have developed a constitutively active form of human Fes, and characterized its biological activity in myeloid cell lines using retrovirus-mediated gene transfer. The transduction of active Fes into U937 promonocytic cells resulted in adherence onto substratum and subsequent differentiation into macrophages as evidenced by a distinctive macrophage morphology, phagocytic ability, nonspecific esterase activity, and upregulation of macrophage-specific differentiation markers such as CD11b, CD11c, CD14, CD54, tissue factor and CD64 (FcgammaRI). In contrast to active Fes, active Src did not induce expression of myeloid cell markers or macrophage differentiation in U937 cells, confirming the specificity of Fes action. Active Fes similarly upregulated myeloid specific markers in another myeloid leukemic cell line, HL-60. Since lineage-specific and ubiquitous transcription factors have been shown to be key regulators of myeloid differentiation, we tested whether Fes had any effect in the activity of these transcription factors using electrophoretic mobility shift assay. We found that expression of active Fes in U937 resulted in activation of the transcription factors PU.1 and AP-1. Moreover, coexpression of Fes with PU.1 cooperatively upregulated CD11b expression in U937. These results support the idea that Fes may be involved in regulation of myeloid-specific gene expression during macrophage differentiation through the activation of PU.1 and AP-1. It has been suggested that Fes has an anti-apoptotic role during granulocyte differentiation. Using IL-3-dependent 32D myeloid precursor cells, we found that expression of active Fes rescued these cells from apoptotic death in the absence of IL-3, and induced granulocyte differentiation. From our results, which revealed differential effects of Fes in different myeloid cells we conclude that Fes is involved in both macrophage and granulocyte differentiation, and we propose that Fes regulates terminal differentiation rather than lineage commitment. In addition, we provide preliminary evidence that Fes is involved in cell adhesion, cytokine production, and macrophage activation.