Treatment of mouse erythroleukemia (MEL) cells with hexamethylene bisacetamide induces a program of erythrodifferentiation, as judged by an increase in the synthesis of globins and other erythroid-specific products. This induction can be inhibited by glucocorticoids, e.g. dexamethasone. All globin and other erythroid-specific genes tested contain GATA response elements (GATA-RE) and can be transactivated by GATA-1, a transcription factor. GATA-1 is highly expressed in erythroid cells, including MEL cells. We noted a glucocorticoid receptor (GR) response element motif near a GATA-RE motif in the promoter region of the mouse beta-major and beta-minor globin genes and about 130 bases away from a GATA-RE in the alpha 1-globin gene promoter and, therefore, investigated the possibility that the dexamethasone-induced inhibition of induced MEL cell differentiation may involve effects of the GR on GATA-1 activity. Evidence obtained from transfection assays and DNA electrophoretic mobility shift assays indicates that the GR binds GATA-1 and interferes with its function before any interaction with DNA, but that the presence of a glucocorticoid response element near a GATA-RE augments the GR effect. The N-terminal 106-amino acid domain of the GR was found to be essential for the effect, possibly by binding to GATA-1. Since GATA-1 is autoregulatory, i.e. it has been shown by others to bind to its own promoter and up-regulate its own transcription, the finding that activated GR can interfere with GATA-1 function may provide an explanation for the inhibition by glucocorticoids of the entire program of erythroid differentiation in MEL cells. That is, by interfering with GATA-1 function, the GR inhibits not only the expression of erythroid structural genes, but may also inhibit the expression of a primary erythroid regulatory gene, GATA-1. It was also shown that the GATA-RE in each of the beta-globin promoters responds to mouse GATA-1 in a functional transfection assay.