The t(8;21) chromosome abnormality in acute myeloid leukemia targets the AML1 and ETO genes to produce the leukemia fusion protein AML1-ETO. Another member of the ETO family, ETO-2/MTG16, is highly expressed in murine and human hematopoietic cells, bears >75% homology to ETO, and like ETO, contains a conserved MYND domain that interacts with the nuclear receptor corepressor (N-CoR). AML1-ETO prevents granulocyte but not macrophage differentiation of murine 32Dcl3 granulocyte/macrophage progenitors. One possible mechanism is recruitment of N-CoR to aberrantly repress AML1 target genes. We wished to examine another mechanism by which AML1-ETO might impair granulocyte differentiation. We demonstrate that AML1-ETO decreases interactions between ETO-2 and N-CoR. Furthermore, overexpression of ETO-2 relieves AML1-ETO-induced granulocyte differentiation arrest. This suggests that decreased interactions between ETO-2 and N-CoR may contribute to granulocyte differentiation impairment. The MYND domain coimmunoprecipitates with N-CoR and inhibits interactions between ETO-2 and N-CoR, presumably by occupying the ETO-2 binding site on N-CoR. This inhibition of ETO-2 interactions with N-CoR is specific because the MYND domain does not inhibit retinoic acid receptor interactions with N-CoR. To examine the effect of decreasing interactions between ETO-2 and N-CoR in hematopoietic cells, without effects of AML1-ETO such as direct repression of AML1 target genes, the MYND domain was expressed in 32Dcl3 and human CD34+ cells. The MYND domain prevented granulocyte but not macrophage differentiation of both 32Dcl3 and human CD34+ cells, recapitulating this effect of AML1-ETO. In conclusion, decreasing interactions between ETO-2 and N-CoR, an effect of AML1-ETO, inhibits granulocyte differentiation.