The (8;21)(q22;q22) translocation, reported in 40% of M2-subtype acute myeloid leukemias (AMLs), is the second-most frequently observed example of a nonrandom genetic alteration associated with AML. Juxtaposition of the AML1 gene on chromosome 21 to the ETO gene on chromosome 8 fuses the NH2-terminal portion of AML1 to near-full length ETO, creating AML1/ETO. Previous work has been focused on perturbation of AML1 gene function by the chimeric fusion protein as a mechanism of leukemogenesis. Here, we demonstrate that ETO itself has transforming properties. Ectopic ETO expression in NIH/3T3 cells led to foci of transformation and colony growth in soft agar. ETO-expressing cells grew to higher saturation densities and induced tumors following injection into irradiated and splenectomized nude mice. Our data suggests that ETO may play an important role in the leukemic transforming potential of the AML1/ETO fusion protein.