Myelodysplastic syndromes (MDS) comprise a heterogeneous group of disorders characterized by ineffective hematopoiesis, with an increased propensity to develop acute myelogenous leukemia (AML). The molecular basis for MDS progression is unknown, but a key element in MDS disease progression is loss of chromosomal material (genomic instability). Using our two-step mouse model for myeloid leukemic disease progression involving overexpression of human mutant NRAS and BCL2 genes, we show that there is a stepwise increase in the frequency of DNA damage leading to an increased frequency of error-prone repair of double-strand breaks (DSB) by nonhomologous end-joining. There is a concomitant increase in reactive oxygen species (ROS) in these transgenic mice with disease progression. Importantly, RAC1, an essential component of the ROS-producing NADPH oxidase, is downstream of RAS, and we show that ROS production in NRAS/BCL2 mice is in part dependent on RAC1 activity. DNA damage and error-prone repair can be decreased or reversed in vivo by N-acetyl cysteine antioxidant treatment. Our data link gene abnormalities to constitutive DNA damage and increased DSB repair errors in vivo and provide a mechanism for an increase in the error rate of DNA repair with MDS disease progression. These data suggest treatment strategies that target RAS/RAC pathways and ROS production in human MDS/AML.