Activation of the basic helix-loop-helix (bHLH) gene TAL-1 (or SCL) is the most frequent gain-of-function mutation in pediatric T cell acute lymphoblastic leukemia (T-ALL). Similarly, mis-expression of tal-1 in the thymus of transgenic mice results in the development of clonal T cell lymphoblastic leukemia. To determine the mechanism(s) of tal-1-induced leukemogenesis, we created transgenic mice expressing a DNA binding mutant of tal-1. Surprisingly, these mice develop disease, demonstrating that the DNA binding properties of tal-1 are not required to induce leukemia/lymphoma in mice. However, wild type tal-1 and the DNA binding mutant both form stable complexes with E2A proteins. In addition, tal-1 stimulates differentiation of CD8-single positive thymocytes but inhibits the development of CD4-single positive cells: effects also observed in E2A-deficient mice. Our study suggests that the bHLH protein tal-1 contributes to leukemia by interfering with E2A protein function(s).