SET binding factor 1 (Sbf1) was originally discovered by virtue of its interaction with a highly conserved motif (the SET domain) of unknown function in the protooncoprotein homolog of Drosophila trithorax, Hrx. Sbf1 shares extensive sequence similarity with myotubularin, a dual specificity phosphatase (dsPTPase) that is mutated in a subset of patients with inherited myopathies. Both Sbf1 and myotubularin interact with the SET domains of Hrx and other epigenetic regulatory proteins, but Sbf1 lacks phosphatase activity due to several evolutionarily conserved amino acid changes in its structurally preserved catalytic pocket. Thus, Sbf1 has features of an anti-phosphatase that could competitively antagonize dsPTPases; however the in vivo role for such factors remains unknown. Given its ability to physically interact with Hrx, a developmental regulator subject to translocation-induced mutations in B cell precursor leukemias, the current studies were undertaken to assess the effects of Sbf1 on lymphopoiesis. After infection with recombinant Sbf1 retroviruses, bone marrow cells were plated under Whitlock-Witte conditions for long-term culture of B lineage cells. Sbf1-expressing cells rapidly dominated the cultures resulting in clonal outgrowths of B cell progenitors that retained a dependence on their primary bone marrow-derived stroma for continuous growth in vitro. Structure/function analyses demonstrated that the SET interaction domain of Sbf1 was necessary and sufficient for growth alterations of B cell progenitors. These observations support a model in which Sbf1 functions as a SET domain-dependent positive regulator of growth-inducing kinase signaling pathways that impinge on SET domain proteins. SET domain-dsPTPase interactions appear to be critically important for regulating the growth properties of B cell progenitors.