Hematopoietic stem cells (HSCs) arise, self-renew, or give rise to all hematopoietic lineages through the effects of transcription factors activated by signaling cascades. Lyl-1 encodes a transcription factor containing a basic helix-hoop-helix (bHLH) motif closely related to scl/tal, which controls numerous decisions in embryonic and adult hematopoiesis. We report here that Lyl-1 null mice are viable and display normal blood cell counts, except for a reduced number of B cells resulting from a partial block after the pro-B stage. Nevertheless, the deletion of Lyl-1 results in a diminution in the frequency of immature progenitors (Lin(-), CD34(-), sca-1(+), c-kit(+) [LSK], and LSK-side population [LSK-SP]) and in S(12) colony-forming unit (CFU-S(12)) and long-term culture-initiating cell (LTC-IC) content in embryonic day 14 fetal liver (E14 FL) and adult bone marrow (BM). More important, Lyl-1(-/-) E14 FL cells and BM are severely impaired in their competitive reconstituting abilities, especially with respect to B and T lineage reconstitution. Thus, ablation of Lyl-1 quantitatively and functionally affects HSCs, a cell population that transcribes Lyl-1 more actively than their differentiated progenies. Our results demonstrate for the first time that Lyl-1 functions are important for HSC properties and B-cell differentiation and that they are largely distinct from scl functions.