USP7, which encodes a deubiquitylating enzyme, is among the most frequently mutated genes in pediatric T-ALL, with somatic heterozygous loss-of-function mutations (haploinsufficiency) predominantly affecting the subgroup that has aberrant TAL1 oncogene activation. Network analysis of > 200 T-ALL transcriptomes linked USP7 haploinsufficiency with decreased activities of E-proteins. E-proteins are also negatively regulated by TAL1, leading to concerted down-regulation of E-protein target genes involved in T-cell development. In T-ALL cell lines, we showed the physical interaction of USP7 with E-proteins and TAL1 by mass spectrometry and ChIP-seq. Haploinsufficient but not complete CRISPR knock-out of USP7 showed accelerated cell growth and validated transcriptional down-regulation of E-protein targets. Our study unveiled the synergistic effect of USP7 haploinsufficiency with aberrant TAL1 activation on T-ALL, implicating USP7 as a haploinsufficient tumor suppressor in T-ALL. Our findings caution against a universal oncogene designation for USP7 while emphasizing the dosage-dependent consequences of USP7 inhibitors currently under development as potential cancer therapeutics.