Gfi-1 is a cellular proto-oncogene that was identified as a target of provirus integration in T-cell lymphoma lines selected for interleukin-2 (IL-2) independence in culture and in primary retrovirus-induced lymphomas. Gfi-1 encodes a zinc finger protein that functions as a transcriptional repressor. Here we show that Gfi-1B, a Gfi-1 related gene expressed in bone marrow and spleen, also encodes a transcriptional repressor. IL-6-induced G1 arrest and differentiation of the myelomonocytic cell line M1 were linked to the downregulation of Gfi-1B and the parallel induction of the cyclin-dependent kinase inhibitor p21WAF1. Experiments addressing the potential mechanism of the apparent coordinate regulation of these genes revealed that Gfi-1B represses p21WAF1 directly by binding to a high-affinity site at -1518 to -1530 in the p21WAF1 promoter. Forced expression of Gfi-1B, but not of Gfi-1B deletion mutants lacking the repressor domain, blocked the IL-6-mediated induction of p21WAF1 and inhibited G1 arrest and differentiation. We conclude that Gfi-1B is a direct repressor of the p21WAF1 promoter, the first such repressor identified to date, and that sustained expression of Gfi-1B blocks IL-6-induced G1 arrest and differentiation of M1 cells perhaps because it prevents p21WAF1 induction by IL-6.