Mice lacking the zinc finger transcriptional repressor protein GFI-1 are neutropenic. These mice generate abnormal immature myeloid cells exhibiting characteristics of both macrophages and granulocytes. Furthermore, Gfi-1(-/-) mice are highly susceptible to bacterial infection. Interestingly, Gfi-1(-/-) myeloid cells overexpress target genes of the PU.1 transcription factor such as the macrophage colony-stimulating factor receptor and PU.1 itself. We therefore determined whether GFI-1 modulates the transcriptional activity of PU.1. Our data demonstrate that GFI-1 physically interacts with PU.1, repressing PU.1-dependent transcription. This repression is functionally significant, as GFI-1 blocked PU.1-induced macrophage differentiation of a multipotential hematopoietic progenitor cell line. Retroviral expression of GFI-1 in primary murine hematopoietic progenitors increased granulocyte differentiation at the expense of macrophage differentiation. We interbred Gfi-1(+/-) and PU.1(+/-) mice and observed that heterozygosity at the PU.1 locus partially rescued the Gfi-1(-/-) mixed myeloid lineage phenotype, but failed to restore granulocyte differentiation. Our data demonstrate that GFI-1 represses PU.1 activity and that lack of this repression in Gfi-1(-/-) myeloid cells contributes to the observed mixed lineage phenotype.