Our results indicate that there are at least two levels of interaction involving M-CSF stimulation of committed stem cells and mature mononuclear cells. Mature cells residing in hematopoietic tissues produce both PGE and IFN alpha/beta upon recognition of CSF in their environment. In vitro, both of these mediators act to suppress CSF-induced colony formation in a negative feedback manner. However, additional evidence indicates that the endogenous IFN acts also to enhance functional maturation of the monocyte progeny. Cultures deprived of IFN during clonal expansion displayed severely depressed capacities to produce IL-1, to resist lytic HSV infection, and to phagocytose opsonized erythrocytes via Fc receptors. Thus, it appears that the result of M-CSF stimulation of a mature cell is the production of a differentiation signal (IFN alpha/beta), which in turn affects an immature cell of the same lineage that responds to the CSF-1 growth stimulus. Whether the Ia+ subpopulation of M-CSF responsive progenitor cells represents precursors for a separate cell lineage or a subclass of macrophages remains to be determined. Similarly, the regulation of these cells by PGE and IFN remains to be explored. However, within the parameters of our investigation, neither these cells nor their specific regulator, acidic isoferritin, were of consequence.