Plasmacytoid dendritic cells (pDCs) are specialized DCs that produce high levels of type I IFN upon viral infection. Despite their key immunoregulatory role, little is known about pDC ontogeny or how developmental events regulate their function. We show that mice expressing low levels of the transcription factor Ikaros (Ik^L/L) lack peripheral pDCs, but not other DC subsets. Loss of pDCs is associated with an inability to produce type I IFN after challenge with Toll-like receptor-7 and -9 ligands, or murine cytomegalovirus (MCMV) infection. In contrast, conventional DCs are present in normal numbers and exhibit normal responses in vivo after challenge with MCMV or inactivated toxoplasma antigen. Interestingly, Ik^L/L bone marrow (BM) cells contain a pDC population that appears blocked at the Ly-49Q^– stage of differentiation and fails to terminally differentiate in response to Flt-3L, a cytokine required for pDC differentiation. This differentiation block is strictly dependent on a cell-intrinsic requirement for Ikaros in pDC-committed precursors. Global gene expression profiling of Ik^L/L BM pDCs reveals an up-regulation of genes not normally expressed, or expressed at low levels, in WT pDCs. These studies suggest that Ikaros controls pDC differentiation by silencing a large array of genes.