Recent genome-wide studies have demonstrated that pausing of RNA polymerase II (Pol II) occurred on many vertebrate genes. By genetic studies in the zebrafish tif1gamma mutant moonshine we found that loss of function of Pol II-associated factors PAF or DSIF rescued erythroid gene transcription in tif1gamma-deficient animals. Biochemical analysis established physical interactions among TIF1gamma, the blood-specific SCL transcription complex, and the positive elongation factors p-TEFb and FACT. Chromatin immunoprecipitation assays in human CD34(+) cells supported a TIF1gamma-dependent recruitment of positive elongation factors to erythroid genes to promote transcription elongation by counteracting Pol II pausing. Our study establishes a mechanism for regulating tissue cell fate and differentiation through transcription elongation.