The Tel gene (or ETV6) is the target of the translocation (12;22)(p13;q11) in myeloid leukemia. TEL is a member of the ETS family of transcription factors and contains the pointed protein interaction (PNT) domain and an ETS DNA binding domain (DBD). By contrast to other chimeric proteins that contain TEL's PNT domain, such as TEL-platelet-derived growth factor beta receptor in t(5;12)(q33;p13), MN1-TEL contains the DBD of TEL. The N-terminal MN1 moiety is rich in proline residues and contains two polyglutamine stretches, suggesting that MN1-TEL may act as a deregulated transcription factor. We now show that MN1-TEL type I, unlike TEL and MN1, transforms NIH 3T3 cells. The transforming potential depends on both N-terminal MN1 sequences and a functional TEL DBD. Furthermore, we demonstrate that MN1 has transcription activity and that MN1-TEL acts as a chimeric transcription factor on the Moloney sarcoma virus long terminal repeat and a synthetic promoter containing TEL binding sites. The transactivating capacity of MN1-TEL depended on both the DBD of TEL and sequences in MN1. MN1-TEL contributes to leukemogenesis by a mechanism distinct from that of other chimeric proteins containing TEL.