ABL (ABL1) and ARG (ABL2) are highly homologous to each other in overall domain structure and amino-acid sequence, with the exception of their C termini. As with ABL, translocations that fuse ARG to ETV6/TEL have been identified in patients with leukemia. To assess the in vivo leukemogenic activity of constitutively active ABL and ARG, we generated a bone marrow (BM) transplantation model using the chimeric forms TEL/ABL and TEL/ARG, which have comparable kinase activities. TEL/ABL rapidly induced fatal myeloid leukemia in recipient mice, whereas recipients of TEL/ARG-transduced cells did not develop myeloid leukemia, instead, they succumbed to a long-latency infiltrative mastocytosis that could be adoptively transferred to secondary recipients. Swapping of the C termini of ABL and ARG altered disease latency and phenotypes. In a detailed in vitro study, TEL/ARG strongly promoted mast cell differentiation in response to stem cell factor or interleukin-3, whereas TEL/ABL preferentially induced myeloid differentiation of hematopoietic stem/progenitor cells. These results indicate that ABL and ARG kinase activate distinct differentiation pathways to induce specific diseases in vivo, that is, myeloid leukemia and mastocytosis, respectively. Further elucidation of the differences in their properties should provide important insight into the pathogenic mechanisms of oncogenes of the ABL kinase family.