Historically, our understanding of mechanisms underlying human leukemogenesis are inferred from genetically engineered mouse models. Relatively, few models that use primary human cells recapitulate the full leukemic transformation as assayed in xenografts and myeloid transformation is infrequent. We report a humanized experimental leukemia model where xenografts develop aggressive acute myeloid leukemia (AML) with disseminated myeloid sarcomas within 4 weeks following transplantation of cord blood transduced with vectors expressing BCR-ABL1 and a dominant-negative isoform of IKAROS, Ik6. Ik6 induced transcriptional programs in BCR-ABL1-transduced progenitors that contained repressed B-cell progenitor programs, along with strong stemness, proliferation and granulocyte-monocytic progenitor (GMP) signatures—a novel combination not induced in control groups. Thus, wild-type IKAROS restrains stemness properties and has tumor suppressor activity in BCR-ABL1-initiated leukemia. Although IKAROS mutations/deletions are common in lymphoid transformation, they are found also at low frequency in AML that progress from a prior myeloproliferative neoplasm (MPN) state. Our experimental system provides an excellent model to gain insight into these rare cases of AML transformation and the properties conferred by IKAROS loss of function as a secondary mutation. More generally, our data points to the importance of deregulated stemness/lineage commitment programs in human myeloid leukemogenesis.