The ability of interferon (IFN) to induce proliferation and differentiation in malignant B cells from 29 patients with chronic lymphocytic leukemia (CLL) and in lymphoid cells from 11 healthy donors was investigated. IFN induced transformation and plasmacytoid differentiation in B cells from 19 of 29 CLL patients. The transformed cells belonged to the malignant clone as indicated by the immunoglobulin (lg) light chain restriction. Cells exposed to IFN expressed intracellular lg to a varying degree, which was correlated to the level of plasmacytoid differentiation. IFN gave rise to proliferative responses in cells from three patients. Cytogenetic studies on lymphoid cells from one patient showed that proliferation occurred in the malignant B cells. Induction of proliferation and differentiation was observed with various alpha-IFN and gamma-IFN preparations, as well as with a completely pure beta-IFN, showing that IFN and not contaminants in the preparations were responsible for the observed effects. Maximal transformation and proliferation usually occurred after four days of incubation at an IFN concentration of 500 to 5,000 U/mL. The ability of IFN to induce differentiation in CLL cells may be of importance for the reported antitumoral effects observed in some B cell malignancies during IFN therapy.