The MTG (Myeloid Translocation Gene) proteins are a family of novel transcriptional corepressors. We report that MTG16a, a protein isoform encoded by the MTG16 gene deranged by the t (16; 21) in myeloid malignancies, is targeted to the nucleolus. The amino acid sequence necessary for nucleolar localization was mapped to the MTG16a N-terminal region. MTG16a, like MTG8, the nuclear corepressor deranged by the t (8; 21), is capable to interact with specific histone deacetylases (HDACs) suggesting that the protein may mediate silencing of nucleolar gene transcription. In addition, MTG16a is capable to form oligomers with other MTG proteins. As a consequence of the t (16; 21) the AML1 DNA-binding domain replaces the MTG16a N-terminal region. The AML1-MTG16 fusion protein is targeted to the nucleoplasm where it is capable to oligomerize with MTG16a and interact with HDAC1 and HDAC3. The deficiency of HDAC-containing complexes at nucleolar sites and the accumulation of HDAC-containing complexes at AML1-sites may be critical in the pathogenesis of t (16; 21) myeloid malignancies.