Transcription factors (TFs) play critical roles in hematopoiesis, and their aberrant expression can lead to various types of leukemia. The t(8;21) leukemogenic fusion protein AML1–ETO (AE) is the most common fusion protein in acute myeloid leukemia and can enhance hematopoietic stem cell renewal while blocking differentiation. A key question in understanding AE-mediated leukemia is what determines the choice of AE to activate self-renewal genes or repress differentiation genes. Toward the resolution of this problem, we earlier showed that AE resides in the stable AETFC complex and that its components colocalize on up- or down-regulated target genes and are essential for leukemogenesis. In the current study, using biochemical and genomic approaches, we show that AE-containing complexes are heterogeneous, and that assembly of the larger AETFC (containing AE, CBFβ, HEB, E2A, LYL1, LMO2, and LDB1) requires LYL1. Furthermore, we provide strong evidence that the LYL1-containing AETFC preferentially binds to active enhancers and promotes AE-dependent gene activation. Moreover, we show that coactivator CARM1 interacts with AETFC and facilitates gene activation by AETFC. Collectively, this study describes a role of oncoprotein LYL1 in AETFC assembly and gene activation by recruiting CARM1 to chromatin for AML cell survival. Copyright © 2022 the Author(s). Published by PNAS.