Pax5 is an essential regulator of B cell identity and function. Here, we used transgenesis and deletion mapping to identify a potent enhancer in intron 5 of the Pax5 locus. This enhancer in combination with the promoter region was sufficient to recapitulate the B lymphoid expression of Pax5. The enhancer was silenced by DNA methylation in embryonic stem cells, but became activated in multipotent hematopoietic progenitors. It contained functional binding sites for the transcription factors PU.1, IRF4, IRF8, and NF-kappa B, suggesting that these regulators contribute to sequential enhancer activation in hematopoietic progenitors and during B cell development. In contrast, the promoter region was repressed by Polycomb group proteins in non-B cells and was activated only at the onset of pro-B cell development through induction of chromatin remodeling by the transcription factor EBF1. These experiments demonstrate a stepwise activation of Pax5 in early lymphopoiesis; and provide mechanistic insights into the process of B cell commitment.