The CCAAT/enhancer binding protein epsilon (C/EBP epsilon) is a nuclear transcription factor expressed predominantly in myeloid cells and implicated as a potential regulator of myeloid differentiation. We show that it was rapidly induced in the acute promyelocytic leukemia (APL) cell line NB4 during granulocytic differentiation after exposure to retinoic acid (RA), Our data suggest that induction of C/EBP epsilon expression was through the retinoic acid receptor alpha (RAR alpha) pathway Reporter gene studies showed that C/EBP epsilon promoter/enhancer activity increased in a retinoid-dependent fashion via the retinoic acid response element (RARE) present in the promoter region of C/EBP epsilon. The RA-induced expression of C/EBP epsilon markedly increased in U937 myelomonoblasts that were induced to express promyelocytic leukemia/RAR alpha (PML/RAR alpha), but not in those induced to express promyelocytic leukemia zinc finger/RAR alpha (PLZF/RAR alpha). In retinoid-resistant APL cell lines, C/EBP epsilon either is not induced or is induced only at very high concentrations of RA (greater than or equal to 10(-6) M). In addition, forced expression of C/EBP epsilon in the U937 myelomonoblastic leukemia cells mimicked terminal granulocytic differentiation, including morphologic changes, increased CD 11b/CD66b expression, and induction of secondary granule protein expression. Our data strongly suggest that C/EBP epsilon is a downstream target gene responsible for RA-induced granulocytic differentiation of APL cells.