The AML-1/CBF beta transcription factor complex is targeted by both the t(8;21) and the inv(16) chromosomal alterations, which are frequently observed in acute myelogenous leukemia. AML-1 is a site-specific DNA-binding protein that recognizes the enhancer core motif TGTGGT. The t(8;21) translocation fuses the first 177 amino acids of AML-1 to MTG8 (also known as ETO), generating a chimeric protein that retains the DNA-binding domain of AML-1. Analysis of endogenous AML-1 DNA-binding complexes suggested the presence of at least two AML-1 isoforms. Accordingly, we screened a human B-cell cDNA library and isolated a larger, potentially alternatively spliced, form of AML1, termed AML1B. AML-1B is a protein of 53 kDa that binds to a consensus AML-1-binding site and complexes with CBF beta. Subcellular fractionation experiments demonstrated that both AML-1 and AML-1/ETO are efficiently extracted from the nucleus under ionic conditions but that AML-1B is localized to a salt-resistant nuclear compartment. Analysis of the transcriptional activities of AML-1, AML-1B, and AML-1/ETO demonstrated that only AML-1B activates transcription from the T-cell receptor beta enhancer. Mixing experiments indicated that AML-1/ETO can efficiently block AML-1B-dependent transcriptional activation, suggesting that the t(8;21) translocation creates a dominant interfering protein.