The basic helix-loop-helix (bHLH) transcription factors HEB and E2A are critical mediators of gene regulation during lymphocyte development. We have cloned a new transcription factor, called HEBAlt, from a pro-T cell cDNA library. HEBAlt is generated by alternative transcriptional initiation and splicing from the HEB gene locus, which also encodes the previously characterized E box protein HEBCan. HEBAlt contains a unique N-terminal coding exon (the Alt domain) that replaces the first transactivation domain of HEBCan. Downstream of the Alt domain, HEBAlt is identical to HEBCan, including the DNA binding domain. HEBAlt is induced in early thymocyte precursors and down-regulated permanently at the double negative to double positive (DP) transition, whereas HEBCan mRNA expression peaks at the DP stage of thymocyte development. HEBAlt mRNA is up-regulated synergistically by a combination of HEBCan activity and Delta-Notch signaling. Retroviral transduction of HEBAlt or HEBCan into hemopoietic stem cells followed by OP9-DL1 coculture revealed that HEBAlt-transduced precursors generated more early T lineage precursors and more DP pre-T cells than control transduced cells. By contrast, HEBCan-transduced cells that maintained high level expression of the HEBCan transgene were inhibited in expansion and progression through T cell development. HEB(-/-) fetal liver precursors transduced with HEBAlt were rescued from delayed T cell specification, but HEBCan-transduced HEB(-/-) precursors were not. Therefore, HEBAlt and HEBCan are functionally distinct transcription factors, and HEBAlt is specifically required for the efficient generation of early T cell precursors.