The SCL (tal-1, TCL5) gene is a member of the basic domain, helix-loop-helix (bHLH) class of putative transcription factors. We found that (i) the SCL promoter for exon Ia contains a potential recognition site for GATA-binding transcription factors, (ii) SCL mRNA is expressed in all erythroid tissues and cell lines examined, and (iii) SCL mRNA increases upon induced differentiation of murine erythroleukemia (MEL) cells, and inferred that SCL may play a physiologic role in erythroid differentiation. We used gel shift and transfection assays to demonstrate that the GATA motif in the SCL promoter binds GATA-1 (and GATA-2), and also mediates transcriptional transactivation. To identify a role for SCL in erythroid differentiation, we generated stable transfectants of MEL and K562 (a human chronic myelogenous leukemia cell line that can differentiate along the erythroid pathway) cells overexpressing wild-type, antisense or mutant SCL cDNA. Increasing the level of SCL expression in two independent MEL lines (F4-6 and C19, a 745 derivative) and K562 cells increased the rate of spontaneous (i.e. in the absence of inducer) erythroid differentiation. Conversely, induced differentiation was inhibited in MEL transfectants expressing either antisense SCL cDNA or a mutant SCL lacking the basic domain. Our experiments suggest that the SCL gene can be a target for the erythroid transcription factor GATA-1 and that the SCL gene product serves as a positive regulator of erythroid differentiation.