Factors stimulating eosinophil differentiation in vitro have been studied by means of a liquid bone marrow culture system in which the number of eosinophils is estimated directly by morphology or indirectly by assay for eosinophil peroxidase. The results show that eosinophil colonies are not formed in agar, emphasizing the importance of the liquid culture system. Three types of evidence identify a novel lymphokine, eosinophil-differentiating factor (EDF). (a) Coordinate analysis of lymphokine activity in media conditioned by a panel of parasite antigen and another panel of alloantigen-reactive T cell clones indicates that EDF is distinct from interleukin 2 (IL-2), IL-3, and bone marrow proliferation activity (BMPA). (b) A T hybrid (NIMP-TH1) produces EDF but no IL-2, IL-3, interferon, or colony-stimulating factor. (c) Gel filtration of conditioned media (CM) indicates that NIMP-TH1 and a T clone (NIMP-T2) produce EDF (Mr 46,000). NIMP-T2 also produced IL-3 (Mr 26,000) but this was easily separated from EDF. IL-3 is also shown to have eosinophil differentiation activity (EDA) but this represents a very small proportion of the EDA in T2-CM. Fractionation of WEHI-3-CM indicates that EDA from this source has a similar elution profile to IL-3 (Mr 35-36,000). Furthermore, a comparison of the relative activities in purified IL-3 and WEHI-3-CM indicates that all the EDA can be attributed to the IL-3 in the latter. EDF is shown to stimulate production of eosinophils in long-term bone marrow cultures; the kinetics of eosinophil production suggests that EDF is acting on committed precursors in the bone marrow. The transient nature of eosinophil production suggests that precursors from multipotential stem cells are not produced. The eosinophils produced in these cultures are morphologically normal and functional in that they lysed sheep red blood cells coated with IgG1, IgG2a, and IgG2b, but not with IgM, IgA, or IgE. In addition, they were capable of adhering to and killing Schistosoma mansoni schistosomula.