Myelodysplastic syndrome and acute myeloid leukemia (AML) belong to a continuous disease spectrum of myeloid malignancies with poor prognosis in the relapsed/refractory setting necessitating novel therapies. Natural killer (NK) cells from patients with myeloid malignancies display global dysfunction with impaired killing capacity, altered metabolism, and an exhausted phenotype at the single-cell transcriptomic and proteomic levels. In this study, we identified that this dysfunction was mediated through a cross-talk between NK cells and myeloid blasts necessitating cell-cell contact. NK cell dysfunction could be prevented by targeting the αvβ-integrin/TGF-β/SMAD pathway but, once established, was persistent because of profound epigenetic reprogramming. We identified BATF as a core transcription factor and the main mediator of this NK cell dysfunction in AML. Mechanistically, we found that BATF was directly regulated and induced by SMAD2/3 and, in turn, bound to key genes related to NK cell exhaustion, such as HAVCR2, LAG3, TIGIT, and CTLA4. BATF deletion enhanced NK cell function against AML in vitro and in vivo. Collectively, our findings reveal a previously unidentified mechanism of NK immune evasion in AML manifested by epigenetic rewiring and inactivation of NK cells by myeloid blasts. This work highlights the importance of using healthy allogeneic NK cells as an adoptive cell therapy to treat patients with myeloid malignancies combined with strategies aimed at preventing the dysfunction by targeting the TGF-β pathway or BATF.