The anemia of chronic disease (ACD) is defined as a mild anemia associated with a chronic inflammatory, infectious or neoplastic illness and with a characteristic disturbance of iron metabolism. Many of the findings in ACD can be accounted for by release of a monokine called leukocyte endogenous mediator (LEM), endogenous pyrogen, or interleukin-1. This substance is released from "activated" monocytes. Bacterial endotoxins, certain lymphokines and phagocytic challenges are among the factors stimulating its biosynthesis. LEM induces fever, leukocytosis, biosynthesis. LEM induces fever, leukocytosis, and a variety of biochemical changes, including hypoferremia and alterations in plasma protein synthesis, collectively known as the "acute phase response." It is proposed that ACD results from the long-term elaboration of LEM and that release of this material is the common pathogenetic factor found in the illnesses that are associated with ACD. Some suggestions are made for testing the hypothesis. The hypoferremia associated with ACD is probably caused by defective release of iron from cells--particularly from macrophages, but also from hepatocytes and intestinal epithelium. Two possible mechanisms for this abnormality have been proposed: liberation of lactoferrin from neutrophilic leukocytes and induction of apoferritin synthesis. Neither mechanism has been established. Erythrokinetic studies in ACD have detected a modest reduction of erythrocyte survival without an adequate compensatory increase in the rate of red cell production. The reduced erythrocyte survival is probably related to an increase in phagocytic activity by activated macrophages. Impaired bone marrow response is partly related to the restricted iron supply, but there is substantial evidence for an additional defect in erythropoietin secretion. In some malignant diseases, there is evidence of an additional abnormality: impaired marrow response to a normal amount of erythropoietin. The nature of the erythropoietic defects and the relation of LEM to them remain to be established.