The t(8;21) translocation is one of the most frequent translocations in acute myeloid leukaemia (AML), giving rise to the AML1-ETO fusion protein (or RUNX1-CBF2T1). This abnormality is associated with myelocytic leukaemia with dysplastic granulopoiesis. Here, we demonstrate that when expressed in a normal human (CD34(+)) progenitor population, AML1-ETO selectively inhibits granulocyte colony formation but not monocyte colony formation. In bulk liquid culture, we found that though AML1-ETO transiently inhibited the proliferation of CD34(+) cells, it promoted long-term growth of myeloid cells for more than 80 days, suggesting that differentiation was inhibited. In support of this, cultures expressing AML1-ETO demonstrated enhanced retention of colony-forming capacity. Phenotypic examination of AML1-ETO cultures revealed a defect in granulocytic differentiation in terms of retention of CD34(+) cells within the culture and delayed CD11b upregulation. Morphologically, granulocyte terminal differentiation in AML1-ETO-expressing cells was inhibited by 83+/-5%, giving rise to a build-up of early to intermediate granulocytes that exhibited a number of morphological features associated with t(8;21) leukaemias. In contrast, AML1-ETO had little or no effect on monocytic differentiation. Taken together, these results suggest that expression of AML1-ETO selectively inhibits the differentiation of granulocytic cells and promoted extensive self-renewal, supporting a causal role for t(8;21) translocations in leukaemogenesis.