We previously demonstrated that an integrated XIST transgene can broadly repress one chromosome 21 in Down syndrome (DS) pluripotent cells. Here we address whether trisomy-silencing can normalize cell function and development sufficiently to correct cell pathogenesis, tested in an in vitro model of human fetal hematopoiesis, for which DS cellular phenotypes are best known. XIST induction in four transgenic clones reproducibly corrected over-production of megakaryocytes and erythrocytes, key to DS myeloproliferative disorder and leukemia. A contrasting increase in neural stem and iPS cells shows cell-type specificity, supporting this approach successfully rebalances the hematopoietic developmental program. Given this, we next used this system to extend knowledge of hematopoietic pathogenesis on multiple points. Results demonstrate trisomy 21 expression promotes over-production of CD43+ but not earlier CD34+/CD43-progenitors and indicates this is associated with increased IGF signaling. This study demonstrates proof-of-principle for this epigenetic-based strategy to investigate, and potentially mitigate, DS developmental pathologies.