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The AML1-CBF beta transcription factor is the most frequent target of chromosomal rearrangements in human leukemia. To investigate its normal function, we generated mice lacking AML1. Embryos with homozygous mutations in AML1 showed normal morphogenesis and yolk sac-derived erythropoiesis, but lacked fetal liver hematopoiesis and died around E12.5. Sequentially targeted AML1-/-es cell retained their capacity to differentiate into primitive erythroid cells in vitro; however, no myeloid or erythroid progenitors of definitive hematopoietic origin were detected in either the yolk sac or fetal livers of mutant embryos. Moreover, this hematopoietic defect was intrinsic to the stem cells in that AML1-/-ES cells failed to contribute to hematopoiesis in chimeric animals. These results suggest that AML1-regulated target genes are essential for definitive hematopoiesis of all lineages.