The transcription factor FOXN1 is a master regulator of thymic epithelial cell (TEC) development and function. Here, we demonstrate that FOXN1 expression is differentially regulated during organogenesis and participates in multimolecular nuclear condensates essential for the factor’s transcriptional activity. FOXN1’s C-terminal sequence regulates the diffusion velocity within these aggregates and modulates the binding to proximal gene regulatory regions. These dynamics are altered in a patient with a mutant FOXN1 that is modified in its C-terminal sequence. This mutant is transcriptionally inactive and acts as a dominant negative factor displacing wild-type FOXN1 from condensates and causing athymia and severe lymphopenia in heterozygotes. Expression of the mutated mouse ortholog selectively impairs mouse TEC differentiation, revealing a gene dose dependency for individual TEC subtypes. We have therefore identified the cause for a primary immunodeficiency disease and determined the mechanism by which this FOXN1 gain-of-function mutant mediates its dominant negative effect.