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Background Myeloid and lymphoid malignancies associated with chimeric FGFR1 kinases are the hallmark of stem cell leukemia and lymphoma syndrome (SCLL). In all cases, FGFR1 kinase is constitutively phosphoactivated as a result of chromosome translocations, which lead to acquisition of dimerization motifs in the chimeric proteins. Recently, we demonstrated that these chimeric kinases could be cleaved by granzyme B to generate a truncated derivative, tnFGFR1, which localized exclusively into the nucleus and was not phosphorylated. Methods Stem cell transduction and transplantation in syngeneic mice was used to assess the transforming ability of tnFGFR1 in bone marrow stem cells, and RPPA and RNA-Seq was used to examine the related signaling pathways and regulated target genes. Results For the first time, we show that this non-classical truncated form of FGFR1 can independently lead to oncogenic transformation of hematopoietic stem cells in an animal model in vivo. These leukemia cells show a mixed immunophenotype with a B-cell B220 + Igm- profile in the majority of cells and Kit+ in virtually all cells, suggesting a stem cell disease. tnFGFR1, however, does not activate classic FGFR1 downstream signaling pathways but induces a distinct profile of altered gene expression with significant upregulation of transmembrane signaling receptors including FLT3 and KIT. We further show that de novo human AML also express tnFGFR1 which correlates with upregulation of FLT3 and KIT as in mouse leukemia cells. ChIP analysis demonstrates tnFGFR1 occupancy at the Flt3 and Kit promoters, suggesting a direct transcriptional regulation. Cells transformed with tnFGFR1 are insensitive to FGFR1 inhibitors but treatment of these cells with the Quizartinib (AC220) FLT3 inhibitor, suppresses in vitro growth and development of leukemia in vivo. Combined treatment with FGFR1 and FLT3 inhibitors provides increased survival compared to FGFR1 inhibition alone. Conclusions This study demonstrates a novel model for transformation of hematopoietic stem cells by chimeric FGFR1 kinases with the combined effects of direct protein activation by the full-length kinases and transcriptional regulation by the truncated nuclear tnFGFR1 derivative, which is associated with GZMB expression levels. Genes significantly upregulated by tnFGFR1 include Flt3 and Kit which promote a leukemia stem cell phenotype. In human AML, tnFGFR1 activation leads to increased FLT3 and KIT expression, and higher FLT3 and GZMB expression levels are associated with an inferior prognosis. These observations provide insights into the relative therapeutic value of targeting FGFR1 and FLT3 in treating AML with this characteristic gene expression profile.