Hematopoietic stem cell differentiation is specified by cytokines and transcription factors but the mechanisms controlling instructive and permissive signalling networks are poorly understood. We provide evidence that common lymphoid progenitor (CLP)-1-dependent IL7-receptor mediated B cell differentiation is critically controlled by the transcriptional repressor Gfi1. Gfi1 is expressed selectively in CLP1 but not in CLP2 cells. Furthermore, in Gfi1-deficient hematopoiesis, CLP1 cells are significantly reduced, while CLP2 cells are present in normal numbers. Hardy fractions B/C, proposed to represent IL7-sensitive stages of early B cell development, are also reduced in Gfi1-deficient bone marrow. In contrast to bone marrow B cells, the phenotype of Gfi1-deficient thymic B cells was comparable to wildtype mice, suggesting that IL7-mediated signalling is perturbed. This hypothesis was further substantiated by a side-by-side comparison of Gfi1- and IL7-deficient mice; both knockout mice revealed a similar B cell phenotype in bone marrow and thymus. In vitro, Gfi1-deficient Sca1+ckit+lin- hematopoietic stem cells did not differentiate into B220+IgM+ B cells in the presence of SCF and IL7, suggesting that instructive IL7-mediated signals are not operative in the absence of Gfi1. Upon retroviral Gfi1 gene transfer, B differentiation was re-established Furthermore, whereas a combination of SCF and IL7 maintained the viability and induced proliferation of Gfi1-deficient HSC, their viability and proliferative capacity was significantly reduced in the presence of IL7 only, suggesting that both trophic and proliferative responses to IL7 depend on Gfi1. In addition, RT-PCR analysis revealed that in early B cell development the coordinated upregulation of the B cell specific transcription factors E2A, EBF, and Pax5 was significantly reduced in sorted Hardy fractions obtained from Gfi1-deficient mice. We reasoned that defective IL7-mediated responses might be due to defective Jak/Stat signalling. Indeed, phosphorylation of STAT5 was almost undectable in Gfi1-deficient B-progenitor cells. This may be due to enhanced expression levels of SOCS3 as determined by RT-PCR and Western Blot analysis. Thus, Gfi1 selectively specifies IL7-dependent development of B cells from CLP1 progenitors, providing clues to the transcriptional networks integrating cytokine signals and lymphoid differentiation.