Mammalian development is regulated by the interplay of tissue-specific and ubiquitously expressed transcription factors, such as Sp1. Sp1 knockout mice die in utero with multiple phenotypic aberrations, but the underlying molecular mechanism of this differentiation failure has been elusive. Here, we have used conditional knockout mice as well as the differentiation of mouse ES cells as a model with which to address this issue. To this end, we examined differentiation potential, global gene expression patterns and Sp1 target regions in Sp1 wild-type and Sp1-deficient cells representing different stages of hematopoiesis. Sp1(-/-) cells progress through most embryonic stages of blood cell development but cannot complete terminal differentiation. This failure to fully differentiate is not seen when Sp1 is knocked out at later developmental stages. For most Sp1 target and non-target genes, gene expression is unaffected by Sp1 inactivation. However, Cdx genes and multiple Hox genes are stage-specific targets of Sp1 and are downregulated at an early stage. As a consequence, expression of genes involved in hematopoietic specification is progressively deregulated. Our work demonstrates that the early absence of active Sp1 sets a cascade in motion that culminates in a failure of terminal hematopoietic differentiation and emphasizes the role of ubiquitously expressed transcription factors for tissue-specific gene regulation. In addition, our global side-by-side analysis of the response of the transcriptional network to perturbation sheds a new light on the regulatory hierarchy of hematopoietic specification.