The TCF-1 and LEF-1 transcription factors are known to play critical roles in normal thymocyte development. Unexpectedly, we found that TCF-1-deficient (Tcf7^−/−) mice developed aggressive T cell malignancy, resembling human T cell acute lymphoblastic leukemia (T-ALL). LEF-1 was aberrantly upregulated in premalignant Tcf7^−/− early thymocytes and lymphoma cells. We further demonstrated that TCF-1 directly repressed LEF-1 expression in early thymocytes and that conditional inactivation of Lef1 greatly delayed or prevented T cell malignancy in Tcf7^−/− mice. In human T-ALLs, an early thymic progenitor (ETP) subtype was associated with diminished TCF7 expression, and two of the ETP-ALL cases harbored TCF7 gene deletions. We also showed that TCF-1 and LEF-1 were dispensable for T cell lineage commitment but instead were required for early thymocytes to mature beyond the CD4⁻CD8⁻ stage. TCF-1 thus has dual roles, i.e., acting cooperatively with LEF-1 to promote thymocyte maturation while restraining LEF-1 expression to prevent malignant transformation of developing thymocytes.