Children with neurofibromatosis type 1 (NF1) are at increased risk of developing malignant myeloid disorders, particularly juvenile chronic myelogenous leukemia/juvenile myelomonocytic leukemia (JCML/JMML). We investigated bone marrows from 11 such patients (8 boys and 3 girls) and detected allelic losses at the NF1 locus in 4 of them and probable losses in 2 others. To determine which hematopoietic cell lineages were derived from the abnormal clones, Epstein-Barr virus (EBV)-transformed cell lines and CD34+ cells were analyzed from 3 children with JCML with allelic losses in unfractionated marrow. CD34 cells from these 3 patients lacked the normal NF1 allele, whereas EBV cell lines retained it. Erythroblasts plucked from the burst-forming unit-erythroid colonies of one of these children lacked the normal NF1 allele. We also studied a 10-month-old boy with NF1 who developed an unusual myeloproliferative syndrome. His bone marrow and EBV cell line both showed loss of the normal NF1 allele. In our series and in the literature, male sex and maternal transmission of NF1 were associated with the highest risk of myeloid leukemia. These data (1) provide strong genetic evidence that NF1 functions as a tumor-suppressor in early myelopoiesis, (2) confirm the clonal nature of JCML/JMML, (3) suggest that the elevation in fetal hemoglobin seen in JCML/JMML is a result of primary involvement of erythroid progenitors in the malignant clone, (4) show consistent loss of NF1 in the CD34 cells of affected children and show that the malignant clone may also give rise to pre-B cells in some cases, and (5) implicate epigenetic factors in the development of leukemia in children with NF1.