Homodimerization of the erythropoietin (EPO) receptor (EPO-R) in response to EPO binding transiently activates the receptor-associated protein tyrosine kinase JAK2. Tyrosine phosphorylation of the EPO-R creates "docking sites" for SH2 domain(s) in signaling molecules such as the protein tyrosine phosphatases SH-PTP1 and SH-PTP2, phosphoinositide 3-kinase (PI3 kinase), and STAT5. However, little is known about the specific intracellular signals essential for proliferation and differentiation of erythroid progenitors. Here we show that an EPO-R containing only one cytosolic (phospho)tyrosine residue, Y479, induces a signal transduction pathway sufficient for proliferation and differentiation of fetal liver progenitors of erythroid colony-forming units from EPO-R(-/-) mice as well as for proliferation of cultured hematopoietic cells. This cascade involves sequential EPO-induced recruitment of PI3 kinase to the EPO-R and activation of mitogen-activated protein kinase activity, independent of the Shc/Grb2-adapter pathway and of STAT5. Protein kinase C epsilon may be one of the mediators connecting PI3 kinase with the mitogen-activated protein kinase signaling cascade. Our results identify a signaling cascade important in vivo for erythroid cell proliferation and differentiation.