The nuclear receptor binding SET domain protein 1 (NSD1) is recurrently mutated in human cancers including acute leukemia. We show that NSD1 knockdown alters erythroid clonogenic growth of human CD34⁺ hematopoietic cells. Ablation of Nsd1 in the hematopoietic system of mice induces a transplantable erythroleukemia. In vitro differentiation of Nsd1^−/− erythroblasts is majorly impaired despite abundant expression of GATA1, the transcriptional master regulator of erythropoiesis, and associated with an impaired activation of GATA1-induced targets. Retroviral expression of wildtype NSD1, but not a catalytically-inactive NSD1^N1918Q SET-domain mutant induces terminal maturation of Nsd1^−/− erythroblasts. Despite similar GATA1 protein levels, exogenous NSD1 but not NSD^N1918Q significantly increases the occupancy of GATA1 at target genes and their expression. Notably, exogenous NSD1 reduces the association of GATA1 with the co-repressor SKI, and knockdown of SKI induces differentiation of Nsd1^−/− erythroblasts. Collectively, we identify the NSD1 methyltransferase as a regulator of GATA1-controlled erythroid differentiation and leukemogenesis.