A protein factor previously shown to enhance terminal differentiation of transformed erythroid cells is synthesized by murine erythroleukemia cells and secreted in the early stages of differentiation induced by hexamethylenebisacetamide (HMBA). Secretion also occurs, constitutively, in the absence of inducer, from a murine erythroleukemia cell variant characterized by an accelerated response to HMBA. The protein factor binds to intact cells following addition of HMBA and enhances translocation of protein kinase C to the nuclear fraction. These results strongly support an important role for this natural protein factor in cell differentiation.