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The sinoatrial node initiates the heartbeat and controls the rate and rhythm of contraction, thus serving as the pacemaker of the heart. Despite the crucial role of the sinoatrial node in heart function, the mechanisms that underlie its specification and formation are not known. Tbx3, a transcriptional repressor required for development of vertebrates, is expressed in the developing conduction system. Here we show that Tbx3 expression delineates the sinoatrial node region, which runs a gene expression program that is distinct from that of the bordering atrial cells. We found lineage segregation of Tbx3-negative atrial and Tbx3-positive sinoatrial node precursor cells as soon as cardiac cells turn on the atrial gene expression program. Tbx3 deficiency resulted in expansion of expression of the atrial gene program into the sinoatrial node domain, and partial loss of sinoatrial node-specific gene expression. Ectopic expression of Tbx3 in mice revealed that Tbx3 represses the atrial phenotype and imposes the pacemaker phenotype on the atria. The mice displayed arrhythmias and developed functional ectopic pacemakers. These data identify a Tbx3-dependent pathway for the specification and formation of the sinoatrial node, and show that Tbx3 regulates the pacemaker gene expression program and phenotype.