Earlier work demonstrated that the Myb-Ets fusion protein of E26 avian leukemia virus induces the proliferation of multipotent hematopoietic progenitors (MEPs). These progenitors differentiate spontaneously at low frequencies along the erythroid lineage, and following the introduction of kinase/ras-type oncogenes or treatment with TPA, they are induced to differentiate along the myelomonocytic and eosinophilic lineages. Here, we show that the ts1.1 mutant of E26 encodes an Ets DNA-binding domain that is both defective and thermolabile for binding of specific DNA sequences. Correlating with this, ts1.1 MEP colonies transformed at the permissive temperature exhibit elevated levels of erythroid cells and eosinophils, whereas at the nonpermissive temperature they are induced to differentiate along the erythroid and myelomonocytic lineages and, to a lesser extent, along the eosinophil lineage. Induction of the former two lineages cannot be separated by pulse shift experiments and is essentially completed 2.5 days after temperature shift. Our results indicate that the Ets portion of the Myb-Ets fusion protein inhibits the lineage commitment of multipotent hematopoietic progenitors, probably via binding to regulatory DNA sequences of specific target genes.