Water-soluble chitosan oligomer (WSCO) has been reported to have anticancer activity, immuno-enhancing effect and antimicrobial activity. However, other biological activities are unknown. Herein, we have shown that WSCO is able to inhibit proliferation of human leukemia HL-60 cells and induce these cells to differentiate. Treatment with WSCO for 4 days resulted in a concentration-dependent reduction in HL-60 cell growth as measured by cell counting and MTT assay. This effect was accompanied by a marked increase in the proportion of G(0)/G(1) cells as measured by flow cytometry. WSCO also induced differentiation of the cells as measured by phorbol ester-dependent reduction of NBT, morphological changes as examined by Wright-Giemsa staining and expression of CD11b but not of CD14 as analysed by flow cytometry, indicating differentiation of HL-60 cells toward granulocyte-like cells. A combination of low dose of WSCO with all-trans retinoic acid, a differentiating agent toward granulocyte-like cells, exhibited a synergistic effect on the differentiation. In addition, treatment of HL-60 cells with WSCO for 6 or 8 days resulted in the induction of apoptosis as assayed qualitatively by agarose gel electrophoresis and quantitatively by Annexin V technique using flow cytometry. Collectively, there is a potential for WSCO in the treatment of myeloid leukemia.