CCAAT displacement protein (cux/CDP) is an atypical homeodomain protein that represses expression of several developmentally regulated lymphoid and myeloid genes in vitro, including gp91-phox, immunoglobulin heavy chain, the T-cell receptor  and ␥ chains, and CD8. To determine how this activity affects cell development in vivo, a hypomorphic allele of cux/CDP was created by gene targeting. Homozygous mutant mice (cux/ CDP ⌬HD/⌬HD ) demonstrated a partial neonatal lethality phenotype. Surviving animals suffered from a wasting disease, which usually resulted in death between 2 and 3 weeks of age. Analysis of T lymphopoiesis demonstrated that cux/CDP ⌬HD/⌬HD mice had dramatically reduced thymic cellularity due to enhanced apoptosis, with a preferential loss of CD4 ؉ CD8 ؉ thymocytes. Ectopic CD25 expression was also observed in maturing thymocytes. B lymphopoiesis was also perturbed, with a 2-to 3-fold reduction in total bone marrow B-lineage cells and a preferential loss of cells in transition from pro-B/pre-BI to pre-BII stages due to enhanced apoptosis. These lymphoid abnormalities were independent of effects related to antigen receptor rearrangement. In contrast to the lymphoid demise, cux/CDP ⌬HD/⌬HD mice demonstrated myeloid hyperplasia. Bone marrow reconstitution experiments identified that many of the hematopoietic defects were linked to microenvironmental effects, suggesting that underexpression of survival factors or overexpression of death-inducing factors accounted for the phenotypes observed. Tumor necrosis factor (TNF) levels were elevated in several tissues, especially thymus, suggesting that TNF may be a target gene for cux/CDP-mediated repression. These data suggest that cux/CDP regulates normal hematopoiesis, in part, by modulating the levels of survival and/or apoptosis factors expressed by the microenvironment. (Blood. 2001;98:3658-3667)