Gfi-1 and Gfi-1b are homologous transcriptional repressors involved in diverse developmental contexts, including hematopoiesis and oncogenesis. Transcriptional repression by Gfi proteins requires the conserved SNAG domain. To elucidate the function of Gfi proteins, we purified Gfi-1b complexes and identified interacting proteins. Prominent among these is the corepressor CoREST, the histone demethylase LSD1, and HDACs 1 and 2. CoREST and LSD1 associate with Gfi-1/1b via the SNAG repression domain. Gfi-1b further recruits these cofactors to the majority of target gene promoters in vivo. Inhibition of CoREST and LSD1 perturbs differentiation of erythroid, megakaryocytic, and granulocytic cells as well as primary erythroid progenitors. LSD1 depletion derepresses Gfi targets in lineage-specific patterns, accompanied by enhanced histone 3 lysine 4 methylation at the respective promoters. Overall, we show that chromatin regulatory proteins CoREST and LSD1 mediate transcriptional repression by Gfi proteins. Lineage-restricted deployment of these cofactors through interaction with Gfi proteins controls hematopoietic differentiation.