p53 loss of heterozygosity (p53LOH) is frequently observed in Li-Fraumeni syndrome (LFS) patients who carry a mutant (Mut) p53 germ-line mutation. Here, we focused on elucidating the link between p53LOH and tumor development in stem cells (SCs). Although adult mesenchymal stem cells (MSCs) robustly underwent p53LOH, p53LOH in induced embryonic pluripotent stem cells (iPSCs) was significantly attenuated. Only SCs that underwent p53LOH induced malignant tumors in mice. These results may explain why LFS patients develop normally, yet acquire tumors in adulthood. Surprisingly, an analysis of single-cell sub-clones of iPSCs, MSCs and ex vivo bone marrow (BM) progenitors revealed that p53LOH is a bi-directional process, which may result in either the loss of wild-type (WT) or Mut p53 allele. Interestingly, most BM progenitors underwent Mutp53LOH. Our results suggest that the bi-directional p53LOH process may function as a cell-fate checkpoint. The loss of Mutp53 may be regarded as a DNA repair event leading to genome stability. Indeed, gene expression analysis of the p53LOH process revealed upregulation of a specific chromatin remodeler and a burst of DNA repair genes. However, in the case of loss of WTp53, cells are endowed with uncontrolled growth that promotes cancer.