The transcription factor Pax5 (BSAP) is required for the expression of a B-cell-specific genetic program and for B-cell differentiation, and also to suppress genes of alternative lineages. The molecular mechanism by which repression of myeloid genes occurs during early B-lineage restriction is unknown and in this study we addressed this question. One of the genes repressed by Pax5 in B cells is the colony-stimulating factor receptor 1 gene (csf1r or c-fms). We examined the changes in chromatin caused by Pax5 activity, and we show that Pax5 is directly recruited to c-fms resulting in the rapid loss of RNA polymerase II binding, followed by loss of transcription factor binding and DNaseI hypersensitivity at all cis-regulatory elements. We also show that Pax5 targets the basal transcription machinery of c-fms by interacting with a binding site within the major transcription start sites. Our results support a model by which Pax5 does not lead to major alterations in chromatin modification, but inhibits transcription by interfering with the action of myeloid transcription factors.