Acquired chromosomal translocations can be identified in nearly 50% of human acute myeloid leukemias. The common chromosomal translocation in this disease is t(8;21) (q22;q22). It involves the aml1 (runx1) gene on chromosome 21 and the eto (mtg8, runx1t1) gene on chromosome 8 generating the aml1/eto fusion gene. An initial model for its pathogenesis emphasized the conversion of a hematopoietic transcriptional activator AML1 into a leukemogenic repressor which blocked myeloid differentiation at the level of target gene regulation. Aml1/eto fusion genes inhibit key hematopoietic transcription factor that function as tumor suppressors at several nodal point during hematopoietic differentiation. A new model is presented in which aml1/eto coordinates expansion of the stem cell compartment with diminished lineage commitment and with genome instability. In this review, the molecular role of aml1/eto fusion gene and his transcribed isoforms in regulating stem renewal, blocking hematopoietic differentiation and interacting with various lineage-specific transcription factors are summarized.