Blimp-1 is considered an essential regulator of the terminal differentiation of B cells into antibody-secreting plasma cells. We show here that Rag1-/- mice reconstituted with fetal liver cells homozygous for a DNA-binding-deficient mutant of Prdm1 (the gene encoding Blimp-1) lack a defined plasma-cell compartment, yet show detectable amounts of all immunoglobulin isotypes. In vitro analysis revealed that Blimp-1 is not required for the initiation of antibody secretion but is essential for subsequent high immunoglobulin production. Blimp-1-independent differentiation was blocked at a preplasmablast stage characterized by decreased Pax5 expression and the activation of plasma-cell genes. Analysis of Blimp-1-sufficient differentiation revealed a phase prior to Blimp-1 expression in which several genes normally repressed by Pax5 are re-expressed, suggesting that plasma-cell differentiation is initiated by the inhibition of Pax5 function. Our results indicate that full plasma-cell differentiation but not commitment to the plasma-cell fate requires the expression of functional Blimp-1.