The Pax5 gene encoding the B-cell-specific activator protein (BSAP) is expressed within the haematopoietic system exclusively in the B-lymphoid lineage, where it is required in vivo for progression beyond the pro-B-cell stage. However, Pax5 is not essential for in vitro propagation of pro-B cells in the presence of interleukin-7 and stromal cells. Here we show that pro-B cells lacking Pax5 are also incapable of in vitro B-cell differentiation unless Pax5 expression is restored by retroviral transduction. Pax5^-/- pro-B cells are not restricted in their lineage fate, as stimulation with appropriate cytokines induces them to differentiate into functional macrophages, osteoclasts, dendritic cells, granulocytes and natural killer cells. As expected for a clonogenic haematopoietic progenitor with lymphomyeloid developmental potential, the Pax5^-/- pro-B cell expresses genes of different lineage-affiliated programmes, and restoration of Pax5 activity represses this lineage-promiscuous transcription. Pax5 therefore plays an essential role in B-lineage commitment by suppressing alternative lineage choices.