Myeloid leukemia cells, the human promyelocytic cell line HL-60, and a subpopulation of normal marrow cells produce a leukemia-associated inhibitor (LAI) that reversibly downmodulates DNA synthesis of normal granulopoietic progenitor cells colony-forming unit granulocyte-macrophage (CFU-GM). We isolated an active 125-kD component of LAI from HL-60 conditioned medium (CM), subjected it to cyanogen bromide cleavage and show by amino acid sequencing of the resulting peptides that it consists of a complex of the serine proteinase inhibitor 1-antitrypsin and a 31-kD fragment that retained the S-phase inhibitory activity, but resisted sequencing. This finding suggested that the 31-kD fragment originated from one of the neutrophil serine proteases (ie, elastase, proteinase 3, or cathepsin G) produced by normal promyelocytes, as well as HL-60 cells, for storage in primary granules and partly secreted during synthesis as enzymatically inactive proforms. Immunoblot analysis showed that the 125-kD complex contained proteinase 3 (PR3), and immunoprecipitation of PR3 from HL-60 CM abrogated the S-phase inhibitory activity, whereas immunoprecipitation of cathepsin G or elastase did not. Immunoprecipitation of PR3 from CM of a subpopulation of normal marrow cells also abrogated the S-phase inhibitory effect. Furthermore, CM from rat RBL and murine 32D cell lines transfected with human PR3 both reduced the fraction of CFU-GM in S-phase with 30% to 80% at 1 to 35 ng/mL PR3, whereas CM of the same cells transfected with cathepsin G or elastase did not. Also, an enzymatically silent mutant of PR3 exerted full activity, showing that the S-phase modulatory effect is not dependent on proteolytic activity. Amino acid sequencing of biosynthetically radiolabeled PR3 showed that PR3 from transfected cells is secreted after synthesis as proforms retaining amino terminal propeptides. In contrast, mature PR3 extracted from mature neutrophils has only minor activity. The inhibitory effect of secreted PR3 is reversible and abrogated by granulocyte (G)- or granulocyte-macrophage colony-stimulating factor (GM-CSF). Experiments with highly purified CD34⁺ bone marrow cells suggested that PR3 acts directly on the granulopoietic progenitor cells. These observations suggest a role for PR3 in regulation of granulopoiesis, and possibly in suppression of normal granulopoiesis in leukemia.