A regulatory circuit that controls myeloid versus B lymphoid cell fate in hematopoietic progenitors has been proposed, in which a network of the transcription factors Egr1/2, Nab, Gfi1 and PU.1 forms the core element. Here we show that a direct link between Gfi1, the transcription factor E2A and its inhibitor Id1 is a critical element of this regulatory circuit. Our data suggest that a certain threshold of Gfi1 is required to gauge E2A activity by adjusting levels of Id1 in multipotent progenitors, which are the first bipotential myeloid/lymphoid-restricted progeny of hematopoietic stem cells. If Gfi1 levels are high, Id1 is repressed enabling E2A to activate a specific set of B lineage genes by binding to regulatory elements for example the IL7 receptor gene. If Gfi1 levels fall below a threshold, Id1 expression increases and renders E2A unable to function, which prevents hematopoietic progenitors from engaging along the B lymphoid lineage.