To investigate how transcription factor levels impact B-lymphocyte development, we generated mice carrying transheterozygous mutations in the Pax5 and Ebf1 genes. Whereas combined reduction of Pax5 and Ebf1 had minimal impact on the development of the earliest CD19(+) progenitors, these cells displayed an increased T cell potential in vivo and in vitro. The alteration in lineage fate depended on a Notch1-mediated conversion process, whereas no signs of de-differentiation could be detected. The differences in functional response to Notch signaling in Wt and Pax5(+/-) Ebf1(+/-) pro-B cells were reflected in the transcriptional response. Both genotypes responded by the generation of intracellular Notch1 and activation of a set of target genes, but only the Pax5(+/-) Ebf1(+/-) pro-B cells down-regulated genes central for the preservation of stable B cell identity. This report stresses the importance of the levels of transcription factor expression during lymphocyte development, and suggests that Pax5 and Ebf1 collaborate to modulate the transcriptional response to Notch signaling. This provides an insight on how transcription factors like Ebf1 and Pax5 preserve cellular identity during differentiation.