Gfi1 is a transcriptional repressor essential for haematopoiesis and inner ear development. It shares with its paralogue Gfi1b an amino-terminal SNAG repressor domain and six carboxy-terminal zinc-finger motifs, but differs from Gfi1b in sequences separating these domains. Here, we describe two knock-in mouse models, in which the N-terminal SNAG repressor domain was mutated or in which the Gfi1 coding region was replaced by Gfi1b. Mouse mutants without an intact SNAG domain show the full phenotype of Gfi1 null mice. However, Gfi1:Gfi1b knock-in mice show almost normal pre-T-cell and neutrophil development, but lack properly formed inner ear hair cells. Hence, our findings show that an intact SNAG domain is essential for all functions of Gfi1 and that Gfi1b can replace Gfi1 functionally in haematopoiesis but, surprisingly, not in inner ear hair cell development, demonstrating that Gfi1 and Gfi1b have equivalent and domain-dependent, cell type-specific functions.