The Ikaros transcription factor is both a key regulator of lymphocyte differentiation and a tumor suppressor in T lymphocytes. Mice carrying a hypomorphic mutation (IkL/L) in the Ikaros gene all develop thymic lymphomas. IkL/L tumors always exhibit strong activation of the Notch pathway, which is required for tumor cell proliferation in vitro. Notch activation occurs early in tumorigenesis and may precede transformation, as ectopic expression of the Notch targets Hes-1 and Deltex-1 is detected in thymocytes from young IkL/L mice with no overt signs of transformation. Notch activation is further amplified by secondary mutations that lead to C-terminal truncations of Notch 1. Strikingly, restoration of Ikaros activity in tumor cells leads to a rapid and specific downregulation of Notch target gene expression and proliferation arrest. Furthermore, Ikaros binds to the Notch-responsive element in the Hes-1 promoter and represses Notch-dependent transcription from this promoter. Thus, Ikaros-mediated repression of Notch target gene expression may play a critical role in defining the tumor suppressor function of this factor.