The Wilms' tumor gene WT1 encodes a zinc finger transcription factor, which is best known for its requirement during development of the genitourinary system. We show here that WT1 is critical for normal murine hematopoiesis. WT1-deficient hematopoietic progenitor cells (WT1^-/-) exhibited an approximately 10-fold lower responsiveness to the proliferative action of erythropoietin (Epo) than CD117-positive cells that had been freshly isolated from the livers of wild-type embryos (WT1^+/+). Consistently, expression of the Epo receptor was reduced significantly in WT1-deficient compared to normal murine hematopoietic progenitor cells. Promoter-reporter constructs for both, the Epo and the Epo receptor gene, were activated between 7- and 20-fold by transient co-transfection of a WT1 expression plasmid. The responsible cis-elements were identified by the combinatorial use of mutation analysis, electrophoretic mobility shift assay and chromatin immunoprecipitation assay. Immunohistochemical staining revealed an overlapping expression of WT1 and Epo in different tissues of the developing mouse embryo. These findings demonstrate that the WT1 transcription factor is involved in murine hematopoiesis. Furthermore, WT1 acts through transcriptional activation of the genes encoding Epo and its receptor.