The essential hematopoietic transcription factor PU.1 is expressed in multipotent thymic precursors but downregulated during T lineage commitment. The significance of PU.1 downregulation was tested using retroviral vectors to force hematopoietic precursors to maintain PU.1 expression during differentiation in fetal thymic organ culture. PU.1 reduced thymocyte expansion and blocked development at the pro-T cell stage. PU.1-expressing cells could be rescued by switching to conditions permissive for macrophage development; thus, the inhibition depends on both lineage and developmental stage. An intact DNA binding domain was required for these effects. PU.1 expression can downregulate pre-Talpha, Rag-1, and Rag-2 in a dose-dependent manner, and higher PU.1 levels induce Mac-1 and Id-2. Thus, downregulation of PU.1 is specifically required for progression in the T cell lineage.