GATA-1 is a tissue-specific transcription factor that is essential for the production of red blood cells^,. Here we show that overexpression of GATA-1 in erythroid cells inhibits their differentiation, leading to a lethal anaemia. Using chromosome-X-inactivation of a GATA-1 transgene and chimaeric animals, we show that this defect is intrinsic to erythroid cells, but nevertheless cell nonautonomous. Usually, cell nonautonomy is thought to reflect aberrant gene function in cells other than those that exhibit the phenotype. On the basis of our data, we propose an alternative mechanism in which a signal originating from wild-type erythroid cells restores normal differentiation to cells overexpressing GATA-1 in vivo. The existence of such a signalling mechanism indicates that previous interpretations of cell-nonautonomous defects may be erroneous in some cases and may in fact assign gene function to incorrect cell types.