The TEL and AML1 genes are common targets of chromosomal translocations in hematopoietic malignancies. The TEL-AML1 fusion gene, created by the t(12;21), is the most common genetic alteration in childhood acute lymphoblastic leukemia and is associated with a favorable outcome. This review summarizes the roles of the TEL and AML1 proteins in hematopoiesis, the potential transforming mechanisms of TEL fusion proteins, and the clinical significance of the TEL-AML1 fusion.