A cytogenetically cryptic (12;21) translocation is the most common molecular abnormality identified in childhood acute lymphoblastic leukemia (ALL), and it generates a chimeric TEL-AML1 protein. Fusion of the Helix-Loop-Helix (HLH) (also called the pointed) domain of TEL to AML1 has been suggested to convert AML1 from a transcriptional activator to a repressor. To define the structural features of this chimeric protein required for repression, we analysed the transcriptional activity of a series of TEL-AML1 mutants on the AML1-responsive interleukin-3 (IL-3) promoter, a potentially relevant gene target. Our results demonstrate that TEL-AML1 represses basal IL-3 promoter activity in lymphoid cells, and deletion mutant analysis identified three distinct domains of TEL-AML1 that are required for repression; the HLH (pointed) motif contained in the TEL portion of TEL-AML1, and both the runt homology domain (Rhd) and the 74 amino acids downstream of the Rhd that are present in the AML1 portion of the fusion protein. Although AML1B (and a shorter AML1 isoform, AML1A) have transcriptional activating activity on the IL-3 promoter, fusion of the AML1 gene to the TEL gene generates a repressor of IL-3 expression. Consistent with this activity, freshly isolated human ALL cells that contain TEL-AML1 do not express IL-3.