CtIP interacts with a group of tumor suppressor proteins including RB (retinoblastoma protein), BRCA1, Ikaros, and CtBP, which regulate cell cycle progression through transcriptional repression as well as chromatin remodeling. However, how CtIP exerts its biological function in cell cycle progression remains elusive. To address this issue, we generated an inactivated Ctip allele in mice by inserting a neo gene into exon 5. The corresponding Ctip(-/-) embryos died at embryonic day 4.0 (E4.0), and the blastocysts failed to enter S phase but accumulated in G(1), leading to a slightly elevated cell death. Mouse NIH 3T3 cells depleted of Ctip were arrested at G(1) with the concomitant increase in hypophosphorylated Rb and Cdk inhibitors, p21. However, depletion of Ctip failed to arrest Rb(-/-) mouse embryonic fibroblasts (MEF) or human osteosarcoma Saos-2 cells at G(1), suggesting that this arrest is RB dependent. Importantly, the life span of Ctip(+/-) heterozygotes was shortened by the development of multiple types of tumors, predominantly, large lymphomas. The wild-type Ctip allele and protein remained detectable in these tumors, suggesting that haploid insufficiency of Ctip leads to tumorigenesis. Taken together, this finding uncovers a novel G(1)/S regulation in that CtIP counteracts Rb-mediated G(1) restraint. Deregulation of this function leads to a defect in early embryogenesis and contributes, in part, to tumor formation.