Germline GATA1 mutations that result in the production of an amino-truncated protein termed GATA1s (where s indicates short) cause congenital hypoplastic anemia. In patients with trisomy 21, similar somatic GATA1s-producing mutations promote transient myeloproliferative disease and acute megakaryoblastic leukemia. Here, we demonstrate that induced pluripotent stem cells (iPSCs) from patients with GATA1-truncating mutations exhibit impaired erythroid potential, but enhanced megakaryopoiesis and myelopoiesis, recapitulating the major phenotypes of the associated diseases. Similarly, in developmentally arrested GATA1-deficient murine megakaryocyte-erythroid progenitors derived from murine embryonic stem cells (ESCs), expression of GATA1s promoted megakaryopoiesis, but not erythropoiesis. Transcriptome analysis revealed a selective deficiency in the ability of GATA1s to activate erythroid-specific genes within populations of hematopoietic progenitors. Although its DNA-binding domain was intact, chromatin immunoprecipitation studies showed that GATA1s binding at specific erythroid regulatory regions was impaired, while binding at many nonerythroid sites, including megakaryocytic and myeloid target genes, was normal. Together, these observations indicate that lineage-specific GATA1 cofactor associations are essential for normal chromatin occupancy and provide mechanistic insights into how GATA1s mutations cause human disease. More broadly, our studies underscore the value of ESCs and iPSCs to recapitulate and study disease phenotypes.