The forkhead transcription factor Foxn1 is indispensable for thymus development, but the mechanisms by which it mediates thymic epithelial cell (TEC) development are poorly understood. To examine the cellular and molecular basis of Foxn1 function, we generated a novel and revertible hypomorphic allele of Foxn1. By varying levels of its expression, we identified a number of features of the Foxn1 system. Here we show that Foxn1 is a powerful regulator of TEC differentiation that is required at multiple intermediate stages of TE lineage development in the fetal and adult thymus. We find no evidence for a role for Foxn1 in TEC fate-choice. Rather, we show it is required for stable entry into both the cortical and medullary TEC differentiation programmes and subsequently is needed at increasing dosage for progression through successive differentiation states in both cortical and medullary TEC. We further demonstrate regulation by Foxn1 of a suite of genes with diverse roles in thymus development and/or function, suggesting it acts as a master regulator of the core thymic epithelial programme rather than regulating a particular aspect of TEC biology. Overall, our data establish a genetics-based model of cellular hierarchies in the TE lineage and provide mechanistic insight relating titration of a single transcription factor to control of lineage progression. Our novel revertible hypomorph system may be similarly applied to analyzing other regulators of development.