We have characterized a murine hybrid cell line, Bb1-3, generated by the fusion of mouse primary erythroblasts with MEL cells. It proliferated in serum-free medium and displayed a low level of spontaneous erythroid and megakaryocyte differentiation. Terminal erythroid differentiation could be induced with HMBA and DMSO and was enhanced by serum. Treatment with phorbol esters resulted in a high proportion of megakaryocytes and the expression of megakaryocytic specific lineage markers. Bb1-3 cells contain a human β-globin transgene that was expressed at levels of 20–50% of the endogenous mouse globin genes. Initially, expression was largely limited to the β-globin gene but after adaptation to serum free growth, equal expression of both the human γ- and human β-globin genes was observed. This cell line provides further evidence that the differentiation potential of mouse erythroleukaemia cells is not restricted to the erythroid lineage and should be useful to study the mechanisms underlying both developmental globin gene regulation and the terminal differentiation of bipotential erythroid/megakaryocytic progenitor cells.