Gfi-1B is a transcriptional repressor essential for the regulation of erythropoiesis and megakaryopoiesis. Here we identify Gfi-1B p32, a Gfi-1B isoform, as essential for erythroid differentiation. Gfi-1B p32 is generated by alternative splicing and lacks the two first zinc finger domains of the protein. Selective knock down of Gfi-1B p32 compromises erythroid differentiation, whereas its ectopic expression induces erythropoiesis in the absence of erythropoietin. Gfi-1B p32 isoform binds to Gfi-1B target gene promoters and associates with the LSD1-CoREST repressor complex more efficiently than the major Gfi-1B p37 isoform. Furthermore, we show that Gfi-1B includes a KSKK motif in its SNAG domain, which recruits the repressor complex only when dimethylated on lysine 8. Mutation of lysine 8 prevents Gfi-1B p32-induced erythroid development. Our results thus highlight a key role for the alternatively spliced Gfi-1B p32 isoform in erythroid development.