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Expression of a NUP98-HOXD13 (NHD13) fusion gene, initially identified in a patient with myelodysplastic syndrome, leads to a highly penetrant myelodysplastic syndrome in mice that recapitulates all of the key features of the human disease. Expansion of undifferentiated lineage negative (linneg) hematopoietic precursors that express NHD13 was markedly inhibited (30-fold) in vitro. Decreased expansion was accompanied by decreased production of terminally differentiated cells, indicating impaired differentiation of NHD13 precursors. Rather than differentiate, the majority (80%) of NHD13 linneg precursors underwent apoptotic cell death when induced to differentiate. These findings demonstrate that NHD13 linneg cells provide a tractable in vitro system for studies of myelodysplastic syndrome.