Acute myeloid leukemia (AML) is characterized by recurrent mutations that affect normal hematopoiesis. The analysis of human AMLs has mostly been performed using end-point materials, such as cell lines and patient derived AMLs that also carry additional contributing mutations. The molecular effects of a single oncogenic hit, such as expression of the AML associated oncoprotein AML1-ETO on hematopoietic development and transformation into a (pre-) leukemic state still needs further investigation. Here we describe the development and characterization of an induced pluripotent stem cell (iPSC) system that allows in vitro differentiation towards different mature myeloid cell types such as monocytes and granulocytes. During in vitro differentiation we expressed the AML1-ETO fusion protein and examined the effects of the oncoprotein on differentiation and the underlying alterations in the gene program at 8 different time points. Our analysis revealed that AML1-ETO as a single oncogenic hit in a non-mutated background blocks granulocytic differentiation, deregulates the gene program via altering the acetylome of the differentiating granulocytic cells, and induces t(8;21) AML associated leukemic characteristics. Together, these results reveal that inducible oncogene expression during in vitro differentiation of iPS cells provides a valuable platform for analysis of aberrant regulation in disease.