The recently cloned fli-1 gene is a member of the ets oncogene family that is preferentially expressed in hematopoietic cells. It is a target of dysregulation by Friend leukemia virus insertion and translocation in Ewing's sarcoma and neuroepithelioma. In this report, we have studied the function and regulation of both murine and human fli-1. Analysis of the human and mouse fli-1 proteins showed that fli-1 binds to specific DNA sequences highly related to m-ets-2 binding sites. Methylation protection experiments showed that fli-1 and m-ets-2 contacted the same nucleotides in two different binding sites. The fli-1 protein was shown to be a transcriptional activator in co-transfection studies. Stimulation of murine bone marrow macrophages by mediators of inflammation, such as lipopolysaccharide, phorbol 12-myristate 13-acetate, interleukin-1, and interferon-gamma resulted in the reduced expression of fli-1 mRNA. fli-1 was only expressed in a defined subset of human erythroleukemia cell lines.