The zinc-finger protein Ikaros is a key player in T-cell development and a potent tumor suppressor in thymocytes. To understand the molecular basis of its function, we disabled Ikaros activity in vivo using a dominant negative Ikaros transgene (DN-IkTg). In DN-IkTg mice, T-cell development was severely suppressed, and positively selected thymocytes clonally expanded, resulting in a small thymus with a heavily skewed T-cell receptor (TCR) repertoire. Notably, DN-IkTg induced vigorous proliferation concomitant to downregulation of antiapoptotic factor expression such as Bcl2. Ikaros activity was required during positive selection, and specifically at the CD4(+)CD8(lo) intermediate stage of thymocyte differentiation, where it prevented persistent TCR signals from inducing aberrant proliferation and expansion. In particular, DN-IkTg induced the accumulation of CD4 single-positive (SP) thymocytes with a developmentally transitional phenotype, and it imposed a developmental arrest accompanied by massive apoptosis. Thus, we identified an in vivo requirement for Ikaros function, which is to suppress the proliferative potential of persistent TCR signals and to promote the survival and differentiation of positively selected thymocytes.