The AML1/EVI-1 chimeric gene is generated by the t(3;21)(q26;q22) translocation and plays a pivotal role in progression of hematopoietic stem cell malignancies such as chronic myelocytic leukemia and myelodysplastic syndrome. In AML1/EVI-1, an N-terminal half of AML1 including a runt homology domain is fused to the entire zinc-finger EVI-1 protein. AML1 is essential for hematopoietic cell development in fetal liver and its lineage-specific differentiation in adult. In contrast, EVI-1 is barely expressed in normal hematopoietic cells, but it is overexpressed in chronic myelocytic leukemia in blastic crisis and myelodysplastic syndrome-derived leukemia. There are at least four mechanisms identified in AML1/EVI-1 fusion protein that possibly lead into malignant transformation of hematopoietic stem cells. Firstly, AML1/EVI-1 exerts dominant-negative effects over AML1-induced transcriptional activation. Although target genes repressed by AML1/EVI-1 are still not known, binding competition to a specific DNA sequence and histone deacetylase recruitment through a co-repressor CtBP in EVI-1 part are conceivable underlying mechanisms for the dominant-negative effects. Secondly, AML1/EVI-1 interferes with TGF beta signaling and antagonizes the growth-inhibitory effects of TGF beta. The first zinc-finger domain of EVI-1 associates with Smad3, a TGF beta signal transducer, and represses its transcriptional activity by recruiting histone deacetylase through CtBP that interacts with EVI-1. Thirdly, AML1/EVI-1 blocks JNK activity and prevents stress-induced apoptosis. AML1/EVI-1 associates with JNK through the first zinc-finger domain of EVI-1 and disturbs the association between JNK and its substrates. Lastly, AML1/EVI-1 enhances AP-1 activity by activating the c-Fos promoter depending on the second zinc-finger domain of EVI-1, and promotes cell proliferation. All these functions cooperatively contribute to the malignant transformation of the hematopoietic stem cells by AML1/EVI-1.