Drosophila melanogaster discs large (dlg) is an essential tumor suppressor gene (TSG) controlling epithelial cell growth and polarity of the fly imaginal discs in pupal development. A mammalian ortholog, Dlg1, is involved in embryonic urogenital morphogenesis, postsynaptic densities in neurons, and immune synapses in lymphocytes. However, a potential role for Dlg1 as a mammalian TSG is unknown. Here, we present evidence that loss of Dlg1 confers strong predisposition to the development of malignancies in a murine model of pediatric B-cell acute lymphoblastic leukemia (B-ALL). Using mice with conditionally deleted Dlg1 alleles, we identify a novel "pre-leukemic" stage of developmentally arrested early B-lineage cells marked by preeminent c-Myc expression. Mechanistically, we show that in B-lineage progenitors Dlg1 interacts with and stabilizes the PTEN protein, regulating its half-life and steady-state abundance. The loss of Dlg1 does not affect the level of PTEN mRNAs but results in a dramatic decrease in PTEN protein, leading to excessive phosphoinositide 3-kinase signaling and proliferation. Our data suggest a novel model of tumor suppression by a PDZ domain-containing polarity gene in hematopoietic cancers.