Tbx1, a T-box transcription factor, and an important gene for velo-cardio-facial syndrome/DiGeorge syndrome (VCFS/DGS) in humans, causes outflow tract (OFT) heart defects when inactivated in the mouse. Tbx1 is expressed in the second heart field (SHF) and is required in this tissue for OFT development. To identify Tbx1 regulated genetic pathways in the SHF, we performed gene expression profiling of the caudal pharyngeal region in Tbx1^−/− and wild type embryos. Isl1, a key marker for the SHF, as well as Hod and Nkx2-6, were downregulated in Tbx1^−/− mutants, while genes required for cardiac morphogenesis, such as Raldh2, Gata4, and Tbx5, as well as a subset of muscle contractile genes, signifying myocardial differentiation, were ectopically expressed. Pan-mesodermal ablation of Tbx1 resulted in similar gene expression changes, suggesting cell-autonomous roles of Tbx1 in regulating these genes. Opposite expression changes concomitant with SHF-derived cardiac defects occurred in TBX1 gain-of-function mutants, indicating that appropriate levels of Tbx1 are required for heart development. When taken together, our studies show that Tbx1 acts upstream in a genetic network that positively regulates SHF cell proliferation and negatively regulates differentiation, cell-autonomously in the caudal pharyngeal region.