Evidence is provided that conditioned medium from a macrophage-like cell line contains molecules of approximately 45 kd molecular weight with granulocyte colony-stimulating factor (G-CSF)-like activity as well as with the property of inducing granulocytes to phagocytose latex particles and to mature morphologically. This type of differentiation was found to be induced on either bone marrow or induced granulocytes, but not on resident or induced macrophages. On the other hand, resident but not induced macrophages are shown to induce these types of activities when challenged by bacterial lipopolysaccharides. Evidence that macrophages produce a factor that is mitogenic for fibroblasts is also provided. This activity was measured by the induction of increased proliferation by either low-density or saturated cultures of fibroblasts. Human recombinant G-CSF was employed and found also to possess these dual capabilities of inducing both the proliferation and differentiation of granulocytes as well as the proliferation of fibroblasts. Finally, a mechanism for the regulation of myeloid cell production and differentiation is described in which G-CSF produced by macrophages not only induces granulocytes to differentiate but induces fibroblasts to proliferate and secrete macrophage colony-stimulating factor (M-CSF), which in turn makes myeloid monocyte precursors proliferate and secrete more G-CSF.