Reciprocal chromosomal translocations at the MLL gene locus result in expression of novel fusion proteins, such as MLL-ENL, associated with leukemia. The three PHD finger cassette, one of the highly conserved domains in MLL, is absent in all fusion proteins. This domain has been shown to interact with Cyp33, a cyclophilin which enhances the recruitment of histone deacetylases (HDAC) to the MLL repression domain and mediates HOX gene repression. Insertion of the third PHD finger of MLL into MLL-ENL allows the recruitment of Cyp33 and, subsequently, HDAC1 to the fusion protein. Furthermore, expression of the fusion protein with the PHD finger insertion mediates the down-regulation of the HOXC8 gene expression in a Cyp33-dependent manner. Finally, the addition of the PHD finger domain or the third PHD finger alone into MLL-ENL blocks the hematopoietic stem cell immortalization potential of the fusion protein in serial plating colony assays. Insertion of only the first and second PHD fingers has no such effect. These data support the hypothesis that the binding of Cyp33 to the MLL third PHD finger switches the MLL function from transactivation to repression. In the immortalizing MLL fusion protein, the loss of the PHD fingers, in combination with the gain of the activation domain of ENL or of other partner proteins, makes the fusion protein a constitutive transactivator. This leads to constitutive overexpression of MLL target genes that block stem cell commitment and promote stem cell renewal, probably the first step in MLL-related leukemogenesis.