Gamma interferon activation factor (GAF) rapidly induces transcriptional activation of gamma interferon (IFN-gamma)-responsive genes. Conversion of the GAF from a latent cytoplasmic to an activated, DNA-binding form is an immediate step in the cellular response to IFN-gamma. The amount of IFN-gamma-activated GAF, measured by exonuclease III protection or gel shift assays, increased strongly upon monocytic differentiation of U937 cells. Activated GAF contained the IFN-responsive 91-kDa protein as its DNA-binding activity in gel shift or exonuclease III assays could be inhibited through direct addition of specific antiserum, and it was not present in p91-immunodepleted extracts. There was a differentiation-induced increase in the amount of nonphosphorylated (latent) p91. Transcription rate measurement demonstrated a strong induction of the p91 gene during monocytic differentiation of U937 cells. The amount of p91 which was rapidly phosphorylated in response to IFN-gamma was found to be much higher in the differentiated cells and suggested a differentiation-controlled increase in the signaling leading to p91 phosphorylation. Concomitantly with a better GAF response, transcriptional activation of IFN-gamma-induced genes and the expression of GAF-dependent, transfected reporter plasmids increased in differentiated U937 monocytes. The promonocyte-monocyte transition also affected the IFN-alpha-responsive transcription factor ISGF-3. Differentiated U937 cells contained more of both the alpha-component p91 and the gamma-component p48, which constitutes the DNA-binding subunit of the complex. Our study thus provides evidence that the synthesis of specific transcription factors can be a regulated event to control the cytokine responsiveness of cells during development.