A t(3;5)(q25.1;q34) chromosomal translocation associated with myelodysplastic syndrome and acute myeloid leukemia (AML) was found to rearrange part of the nucleophosmin (NPM) gene on chromosome 5 with sequences from a novel gene on chromosome 3. Chimeric transcripts expressed by these cells contain 5' NPM coding sequences fused in-frame to those of the new gene, which we named myelodysplasia/myeloid leukemia factor 1 (MLF1). RNA-based polymerase chain reaction analysis revealed identical NPM-MLF1 mRNA fusions in each of the three t(3;5)-positive cases of AML examined. The predicted MLF1 amino acid sequence lacked homology to previously characterized proteins and did not contain known functional motifs. Normal MLF1 transcripts were expressed in a variety of tissues, most abundantly in testis, ovary, skeletal muscle, heart, kidney and colon. Anti-MLF1 antibodies detected the wild-type 31 kDa protein in K562 and HEL erythroleukemia cell lines, but not in HL-60, U937 or KG-1 myeloid leukemia lines. By contrast, t(3;5)-positive leukemia cells expressed a 54 kDa NPM-MLF1 protein, but not normal MLF1. Immunostaining experiments indicated that MLF1 is normally located in the cytoplasm, whereas NPM-MLF1 is targeted to the nucleus, with highest levels in the nucleolus. The nuclear/nucleolar localization of NPM-MLF1 mirrors that of NPM, indicating that NPM trafficking signals direct MLF1 to an inappropriate cellular compartment in myeloid leukemia cells.