MLL-AFX is a fusion gene created by t(X;11) chromosomal translocations in a subset of acute leukemias of either myeloid or lymphoid derivation. It codes for a chimeric protein consisting of MLL fused to AFX, a forkhead transcription factor that normally regulates genes involved in apoptosis and cell cycle progression. We demonstrate here that forced expression of MLL-AFX enhances the self-renewal of hematopoietic progenitors in vitro and induces acute myeloid leukemias after long latencies in syngeneic recipient mice. MLL-AFX interacts with the transcriptional coactivator CBP, which is also a fusion partner for MLL in human leukemias. A potent minimal transactivation domain (CR3) at the C terminus of AFX mediates interactions with the KIX domain of CBP and is necessary for transformation of myeloid progenitors by MLL-AFX. However, CR3 alone is not sufficient, suggesting that simple acquisition of a transactivation domain per se does not activate the oncogenic potential of MLL. Rather, two conserved transcriptional effector domains (CR2 and CR3) of AFX are required for full oncogenicity of MLL-AFX and also endow it with the potential to competitively interfere with transcription and apoptosis mediated by wild-type forkhead proteins. Furthermore, a dominant-negative mutant of AFX containing CR2 and CR3 enhances the growth of myeloid progenitors in vitro, although considerably less effectively than does MLL-AFX. Taken together, these data suggest that recruitment of transcriptional cofactors utilized by forkhead proteins is a critical requirement for oncogenic action of MLL-AFX, which may impact both MLL- and forkhead-dependent transcriptional pathways.