Two candidate genes for controlling thymocyte differentiation, T-cell factor-1 (Tcf-1) and lymphoid enhancer-binding factor (Lef-1), encode closely related DNA-binding HMG-box proteins(1,2). Their expression pattern is complex and largely overlapping during embryogenesis, yet restricted to lymphocytes postnatally(3). Here we generate two independent germline mutations in Tcf-1 and find that thymocyte development is (otherwise normal) mutant mice is blocked at the transition from the CD8(+), immature single-positive to the CD4(+)/CD8(+) double-positive stage. Is contrast to wild-type mice, most of the immature single-positive cells in the mutants are not in the cell cycle and the number of immunocompetent T cells in peripheral lymphoid organs is reduced. We conclude that Tcf-1 controls an essential step in thymocyte differentiation.