B cell lineage acute lymphoblastic leukemia (ALL) arises in virtually all cases from B cell precursors that are arrested at pre–B cell receptor–dependent stages. The Philadelphia chromosome–positive (Ph+) subtype of ALL accounts for 25–30% of cases of adult ALL, has the most unfavorable clinical outcome among all ALL subtypes and is defined by the oncogenic BCR-ABL1 kinase and deletions of the IKAROS gene in >80% of cases. Here, we demonstrate that the pre–B cell receptor functions as a tumor suppressor upstream of IKAROS through induction of cell cycle arrest in Ph+ ALL cells. Pre–B cell receptor–mediated cell cycle arrest in Ph+ ALL cells critically depends on IKAROS function, and is reversed by coexpression of the dominant-negative IKAROS splice variant IK6. IKAROS also promotes tumor suppression through cooperation with downstream molecules of the pre–B cell receptor signaling pathway, even if expression of the pre–B cell receptor itself is compromised. In this case, IKAROS redirects oncogenic BCR-ABL1 tyrosine kinase signaling from SRC kinase-activation to SLP65, which functions as a critical tumor suppressor downstream of the pre–B cell receptor. These findings provide a rationale for the surprisingly high frequency of IKAROS deletions in Ph+ ALL and identify IKAROS-mediated cell cycle exit as the endpoint of an emerging pathway of pre–B cell receptor–mediated tumor suppression.