The cyclin-dependent kinase (Cdk) inhibitors p21(Cip1) and p27(Kip1) have been proposed to exert redundant functions in cell cycle progression and differentiation programs, although nonoverlapping functions have also been described. To gain further insights into the relevant mechanisms and to detect possible functional differences between both proteins, we conditionally expressed p21(Cip1) and p27(Kip1) in K562, a multipotent human leukemia cell line. Temporal ectopic expression of either p21(Cip1) or p27(Kip1) arrested proliferation, inhibited Cdk2 and Cdk4 activities, and suppressed retinoblastoma phosphorylation. However, whereas p21(Cip1) arrested cells in both G(1) and G(2) cell cycle phases, p27(Kip1) blocked the G(1)/S-phase transition. Furthermore, although both p21(Cip1) and p27(Kip1) associated with Cdk6, only p27(Kip1) significantly inhibited its activity. Most importantly, each protein promoted differentiation along a distinct pathway; p21(Cip1) triggered megakaryocytic maturation, whereas p27(Kip1) resulted in the expression of erythroid markers. Consistently, p21(Cip1) and p27(Kip1) were rapid and transiently up-regulated when K562 cells are differentiated into megakaryocytic and erythroid lineages, respectively. These findings demonstrate distinct functions of p21(Cip1) and p27(Kip1) in cell cycle regulation and differentiation and indicate that these two highly related proteins possess unique biological activities and are not functionally interchangeable.