Children with Down syndrome have a 10-20-fold elevated risk of developing leukemia, particularly acute megakaryoblastic leukemia (AMKL). While a subset of pediatric AMKLs is associated with the 1;22 translocation and expression of a mutant fusion protein, the genetic alterations that promote Down syndrome-related AMKL (DS-AMKL) have remained elusive. Here we show that leukemic cells from every individual with DS-AMKL that we examined contain mutations in GATA1, encoding the essential hematopoietic transcription factor GATA1 (GATA binding protein 1 or globin transcription factor 1). Each mutation results in the introduction of a premature stop codon in the gene sequence that encodes the amino-terminal activation domain. These mutations prevent synthesis of full-length GATA1, but not synthesis of a shorter variant that is initiated downstream. We show that the shorter GATA1 protein, which lacks the N-terminal activation domain, binds DNA and interacts with its essential cofactor Friend of GATA1 (FOG1; encoded by ZFPM1) to the same extent as does full-length GATA1, but has a reduced transactivation potential. Although some reports suggest that the activation domain is dispensable in cell-culture models of hematopoiesis, one study has shown that it is required for normal development in vivo. Together, these findings indicate that loss of wildtype GATA1 constitutes one step in the pathogenesis of AMKL in Down syndrome.