The hematopoietic compartments act as long-term reservoirs for human immunodeficiency virus type-1 (HIV-1). Although hematopoietic progenitor cells (HPCs) are rarely infectable, HPCs committed to the megakaryocytic lineage can be infected and support a productive infection by both the X4 and R5 strains of HIV-1. Indeed, in contrast to the CD34+ progenitors, the lineage-committed HPCs express high levels of the HIV-1 co-receptors, CXCR4 and CCR5. The HIV-1 transactivator (Tat) protein has been shown to alter co-receptor expression in T lymphocytes and macrophages. We hypothesized that Tat may regulate co-receptor expression in lineage-specific HPCs as Well. We have monitored the effects of Tat protein on co-receptor expression and on lineage-specific differentiation, using the HPC cell line, K562. Butyric acid (BA)-induced erythroid differentiation in K562 cells was suppressed by 1–100 ng/ml of Tat, as evident from a 70–80% decrease in hemoglobin (Hb) production and a 10–30-fold decrease in glycophorin-A expression. However, Tat treatment enhanced phorbol myristate acetate (PMA)-induced megakaryocytic differentiation, as evident from a 180–210% increase in ³H-serotonin uptake and a 5–12-fold increase in CD61 expression. Tat did not significantly alter co-receptor expression in erythroid cells. However, Tat co-treatment profoundly effected both CXCR4 and CCR5 gene expression and protein levels in megakaryocytic cells. In PMA-stimulated cells, Tat increased CXCR4 and decreased in CCR5 expression, this was potentiated in cells chronically exposed to Tat. In conclusion, Tat protein suppresses erythroid and facilitates megakaryocytic differentiation of K562 cells. In megakaryocytic cells, Tat differentially effected CXCR4 and CCR5 expression. Because megakaryocytes may play a crucial role in HIV-1 infectivity in viral reservoirs, our findings implicate a role for Tat protein in dictating co-receptor usage in lineage-committed HPCs.