The transcription factor FOXN1 is a master regulator of thymic epithelial cell development and function. Here we demonstrate that FOXN1 expression is differentially regulated during organogenesis and participates in multi-molecular nuclear condensates essential for the factor's transcriptional activity. FOXN1's C-terminal sequence regulates the diffusion velocity within these aggregates and modulates the binding to proximal gene regulatory regions. These dynamics are significantly altered in a patient with a mutant FOXN1 which is modified in its C-terminal sequence. This mutant is transcriptionally inactive and acts as a dominant negative factor displacing wild-type FOXN1 from condensates and causing athymia and severe lymphopenia in heterozygotes. Expression of the mutated mouse ortholog, selectively impairs mouse thymic epithelial cell (TEC) differentiation revealing a gene dose dependency for individual TEC subtypes. We have therefore identified the cause for a primary immunodeficiency disease and determined the mechanism by which this FOXN1 gain-of-function mutant mediates its dominant negative effect.