The adverse potential of the development of myelodysplastic syndrome (MDS) in Fanconi anemia (FA) was examined in a retrospective study of 41 FA patients who had bone marrow morphology and chromosomes reviewed by a single group. Thirty-three patients had adequate cytogenetic studies, and 16 (48%) had one or more abnormal studies: nine initially, and seven more on follow-up. Cytogenetic clonal variation was frequent, including disappearance of clones, clonal evolution, and appearance of new clones. The estimated five-year survival with a cytogenetic clone is 0.40, compared to 0.94 without a clone. Morphologic myelodysplasia (MDS), independent of a cytogenetic clone, was found in 13/41 patients (32%). The estimated five-year survival with MDS is 0.09, versus 0.92 without MDS. Leukemia developed in three patients whose initial cytogenetic clones prior to leukemia were t(1;18), t(5;22) and monosomy 7; the one with t(1;18) also had MDS. Our results focus on marrow morphology, and suggest that morphologic MDS may be more important than classical cytogenetics in prediction of an adverse outcome.