TLS-ERG fusion protein is derived from the t(16;21) translocation found in human myeloid leukemia. Here, we show that retroviral transduction of TLS-ERG confers a growth advantage to L-G myeloid progenitor cells and blocks terminal differentiation. We found that the level of cyclin-dependent kinase 1 (Cdk1) protein was significantly decreased in controls but unchanged in TLS-ERG-expressing cells after granulocyte colony-stimulating factor treatment or interleukin-3 withdrawal. Injection of TLS-ERG-expressing L-G cells induced rapid development of a leukemia-like disease in syngeneic mice. Through site-directed mutagenesis, we showed that transformation and deregulation of Cdk1 by TLS-ERG require an intact ets DNA-binding domain within the fusion protein. Interestingly, treatment of TLS-ERG-expressing L-G cells with 5-aza-2'-deoxycytidine (Decitabine) or trichostatin A resulted in down-regulation of Cdk1 and induction of terminal differentiation. To investigate whether Cdk1 deregulation is indeed responsible for transformation by TLS-ERG, we constructed lentiviral vectors for delivery of Cdk1 mutants and small interfering RNA (siRNA). Both dominant-negative inhibition and siRNA knockdown of Cdk1 were able to restore the ability of TLS-ERG-expressing L-G cells to undergo terminal differentiation. In addition, siRNA knockdown of Cdk1 in YNH-1 cells derived from a t(16;21) acute myelogenous leukemia patient also resulted in terminal differentiation. As restoration of terminal myeloid differentiation to TLS-ERG cells is dependent on cell cycle arrest, our findings suggest an important role for Cdk1 in cellular transformation and may be useful in the search for new treatments of TLS-ERG-associated myeloid leukemia.