Chromosomal translocations involving the Mixed Lineage Leukemia (MLL) gene produce chimeric proteins that cause abnormal expression of a subset of HOX genes and leukemia development. Here, we show that MLL normally regulates expression of mir-196b, a hematopoietic microRNA located within the HoxA cluster, in a pattern similar to that of the surrounding 5′ Hox genes, Hoxa9 and Hoxa10, during embryonic stem (ES) cell differentiation. Within the hematopoietic lineage, mir-196b is most abundant in short-term hematopoietic stem cells and is down-regulated in more differentiated hematopoietic cells. Leukemogenic MLL fusion proteins cause overexpression of mir-196b, while treatment of MLL-AF9 transformed bone marrow cells with mir-196–specific antagomir abrogates their replating potential in methylcellulose. This demonstrates that mir-196b function is necessary for MLL fusion-mediated immortalization. Furthermore, overexpression of mir-196b was found specifically in patients with MLL associated leukemias as determined from analysis of 55 primary leukemia samples. Overexpression of mir-196b in bone marrow progenitor cells leads to increased proliferative capacity and survival, as well as a partial block in differentiation. Our results suggest a mechanism whereby increased expression of mir-196b by MLL fusion proteins significantly contributes to leukemia development.