The lineage-determining transcription factor CCAAT enhancer binding protein α (C/EBPα) is required for myeloid differentiation. Decreased function or expression of C/EBPα is often found in human acute myeloid leukemia. However, the precise impact of C/EBPα deficiency on the maturation arrest in leukemogenesis is not well understood. To address this question, we used a murine transplantation model of a bcr/abl-induced myeloproliferative disease. The expression of bcr/abl in C/EBPα^pos fetal liver cells led to a chronic myeloid leukemia-like disease. Surprisingly, bcr/abl-expressing C/EBPα^−/− fetal liver cells failed to induce a myeloid disease in transplanted mice, but caused a fatal, transplantable erythroleukemia instead. Accordingly, increased expression of the transcription factors SCL and GATA-1 in hematopoietic precursor cells of C/EBPα^−/− fetal livers was found. The mechanism for the lineage shift from myeloid to erythroid leukemia was studied in a bcr/abl-positive cell line. Consistent with findings of the transplant model, expression of C/EBPα and GATA-1 was inversely correlated. Id1, an inhibitor of erythroid differentiation, was identified as a critical direct target of C/EBPα. Down-regulation of Id1 by RNA interference impaired C/EBPα-induced granulocytic differentiation. Taken together, our study provides evidence that myeloid lineage identity of malignant hematopoietic progenitor cells requires the residual expression of C/EBPα.