The Scl (Tal1) gene encodes a helix-loop-helix transcription factor essential for hematopoietic stem cell and erythroid development. The Scl +40 enhancer is situated downstream of Map17, the 3' flanking gene of Scl, and is active in transgenic mice during primitive and definitive erythropoiesis. To analyze the in vivo function of the Scl +40 enhancer within the Scl/Map17 transcriptional domain, we deleted this element in the germ line. Scl(Δ40/Δ40) mice were viable with reduced numbers of erythroid CFU in both bone marrow and spleen yet displayed a normal response to stress hematopoiesis. Analysis of Scl(Δ40/Δ40) embryonic stem (ES) cells revealed impaired erythroid differentiation, which was accompanied by a failure to upregulate Scl when erythropoiesis was initiated. Map17 expression was also reduced in hematopoietic tissues and differentiating ES cells, and the Scl +40 element was able to enhance activity of the Map17 promoter. However, only Scl but not Map17 could rescue the Scl(Δ40/Δ40) ES phenotype. Together, these data demonstrate that the Scl +40 enhancer is an erythroid cell-specific enhancer that regulates the expression of both Scl and Map17. Moreover, deletion of the +40 enhancer causes a novel erythroid phenotype, which can be rescued by ectopic expression of Scl but not Map17.