Erythropoietin is the primary factor regulating red blood cell formation in mammals and some other animals. It has been purified from plasma derived from anemic sheep and from the urine of anemic patients and is a glycoprotein. The sheep hormone has a molecular weight of 46,000 and appears to consist of a single chain. The carbohydrate and amino acid compositions where known, are summarized, as are the known structural requirements for biological activity. Its mode of action as the inducer of red cell differentiation has been studied in marrow cell and fetal liver cell cultures. Erythropoietin interacts first with a protein receptor on its target cell causing the appearance of a cytoplasmic protein thought to be a mediator that, in turn, causes an increased rate of transcription in the target cell nuclei. There are several different species of RNA synthesized before the cells initiate hemoglobin synthesis. The effect on transcription is only indirectly dependent on DNA synthesis. Some properties of the primitive erythropoietin-responsive cell are discussed and a cellular model for blood cell differentiation is presented.