Telomerase, a ribonucleic acid-protein complex, adds hexameric repeats of 5'-TTAGGG-3' to the ends of mammalian chromosomal DNA (telomeres) to compensate for the progressive loss that occurs with successive rounds of DNA replication. Although somatic cells do not express telomerase, germ cells and immortalized cells, including neoplastic cells, express this activity. To determine whether the phenotypic differentiation of immortalized cells is linked to the regulation of telomerase activity, terminal differentiation was induced in leukemic cell lines by diverse agents. A pronounced downregulation of telomerase activity was produced as a consequence of the differentiated status. The differentiation-inducing agents did not directly inhibit telomerase activity, suggesting that the inhibition of telomerase activity is in response to induction of differentiation. The loss of telomerase activity was not due to the production of an inhibitor, since extracts from differentiated cells did not cause inhibition of telomerase activity. By using additional cell lineages including epithelial and embryonal stem cells, down-regulation of telomerase activity was found to be a general response to the induction of differentiation. These findings provide the first direct link between telomerase activity and terminal differentiation and may provide a model to study regulation of telomerase activity.