The NELF complex is a metazoan-specific factor essential for establishing transcription pausing. Although NELF has been implicated in cell fate regulation, the cellular regulation of NELF and its intrinsic role in specific lineage differentiation remains largely unknown. Using mammalian hematopoietic differentiation as a model system, here we identified a dynamic change of NELF-mediated transcription pausing as a novel mechanism regulating hematopoietic differentiation. We found a sharp decrease of NELF protein abundance upon granulocytic differentiation and a subsequent genome-wide reduction of transcription pausing. This loss of pausing coincides with activation of granulocyte-affiliated genes and diminished expression of progenitor markers. Functional studies revealed that sustained expression of NELF inhibits granulocytic differentiation, whereas NELF depletion in progenitor cells leads to premature differentiation towards the granulocytic lineage. Our results thus uncover a previously unrecognized regulation of transcription pausing by modulating NELF protein abundance to control cellular differentiation.