Lmo2 is an oncogenic transcription factor that is frequently overexpressed in T cell acute lymphoblastic leukemia (T-ALL) including early T-cell precursor ALL (ETP-ALL) cases with poor prognosis. Lmo2 must be recruited to DNA by binding to the hematopoietic basic helix-loop-helix (bHLH) factors Scl/Tal1 or Lyl1. However, it is unknown which of these factors can mediate the leukemic activity of Lmo2. To address this, we have generated Lmo2-transgenic mice lacking either Scl or Lyl1 in the thymus. We show that whilst Scl is dispensable for Lmo2-driven leukaemia, Lyl1 is critical for all oncogenic functions of Lmo2, including upregulation of a stem cell-like gene signature, aberrant self-renewal of thymocytes and subsequent generation of T-cell leukaemia. Lyl1 expression is restricted to preleukemic and leukemic stem cell populations in this model, providing a molecular explanation for the stage-specific expression of the Lmo2-induced gene expression programme. Moreover, LMO2 and LYL1 are co-expressed in ETP-ALL patient samples and LYL1 is required for growth of ETP-ALL cell lines. Thus the LMO2-LYL1 interaction is a promising therapeutic target for inhibiting self-renewing cancer stem cells in T-ALL, including poor-prognosis ETP-ALL cases.