Common lymphoid progenitors (CLPs) are the first bone marrow precursors in which V(D)J recombinase activity is up-regulated. Here, we show that loss of the transcription factor E47 produces a reduced CLP population that lacks V(D)J recombinase activity and D-J(H) rearrangements in vivo. Apart from a profound arrest before the pro-B cell stage, other downstream lymphoid progeny of CLPs are still intact in these mice albeit at reduced numbers. In contrast to the inhibition of recombinase activity in early B lineage precursors in E47-deficient animals, loss of either E47 or its cis-acting target Erag (enhancer of rag transcription) has little effect on recombinase activity in thymic T lineage precursors. Taken together, this work defines a role for E47 in regulating lineage progression at the CLP stage in vivo and describes the first transcription factor required for lineage-specific recombinase activity.