The rules of engagement between zinc finger transcription factors and DNA have been partly defined by in vitro DNA-binding and structural studies, but less is known about how these rules apply in vivo. Here, we demonstrate how a missense mutation in the second zinc finger of Krüppel-like factor-1 (KLF1) leads to degenerate DNA-binding specificity in vivo, resulting in ectopic transcription and anemia in the Nan mouse model. We employed ChIP-seq and 4sU-RNA-seq to identify aberrant DNA-binding events genome wide and ectopic transcriptional consequences of this binding. We confirmed novel sequence specificity of the mutant recombinant zinc finger domain by performing biophysical measurements of in vitro DNA-binding affinity. Together, these results shed new light on the mechanisms by which missense mutations in DNA-binding domains of transcription factors can lead to autosomal dominant diseases.