Protein phosphatase 1 complex (PP1C), consisting of one of the phosphatases, PP1α, β and γ, and three regulatory subunits, PNUTS, TOX4 and WDR82, plays critical roles in gene regulation and is mutated in over 20% of uterine corpus endometrial carcinoma cases. TOX4 is the least understood PP1C subunit. Here we show that chromatin occupancy pattern of TOX4 resembles that of RNA polymerase II (Pol II), and its loss increases the phosphorylation of the C-terminal domain and decreases the global occupancy of Pol II. Mechanistically, it promotes promoter-proximal pause of Pol II by facilitating the recruitment of DSIF and NELF likely in a dephosphorylation dependent manner. Moreover, quantitative proteomic analyses revealed that TOX4 mainly facilitates protein dephosphorylation by PP1 phosphatases. Furthermore, Tox4 knockout in mice impairs T cell development by dysregulating genes critical for survival, proliferation and fate determination. These results lay the foundation for further understanding roles of TOX4 in transcription, development and diseases.