The fusion oncogene CBFB–MYH11 is generated by a chromosome 16 inversion in human acute myeloid leukemia subtype M4Eo. Mouse embryonic stem (ES) cells heterozygous for this oncogene were generated by inserting part of the human MYH11 cDNA into the mouse Cbfb gene through homologous recombination (knock-in). Chimeric mice were leukemia free, but the ES cells with the knocked-in Cbfb–MYH11 gene did not contribute to their hematopoietic tissues. Mouse embryos heterozygous for Cbfb–MYH11 lacked definitive hematopoiesis and developed multiple fatal hemorrhages around embryonic day 12.5. This phenotype is very similar to that resulting from homozygous deletions of either Cbfb or Cbfa2 (AML1), consistent with a dominant negative function of the Cbfb–MYH11 fusion oncogene. An impairment of primitive hematopoiesis was also observed, however, suggesting a possible additional function of Cbfb–MYH11.