Children with Down syndrome (DS) have a high risk for acute myeloid leukemia (DS-ML). Genomic characterization of DS-ML blasts showed the presence of unique mutations in GATA1, an essential hematopoietic transcription factor, leading to the production of a truncated from of GATA1 (GATA1s). GATA1s, together with trisomy 21, is sufficient to develop a pre-leukemic condition called transient abnormal myelopoiesis (TAM). Approximately 30% of these cases progress into DS-ML by acquisition of additional somatic mutations in a stepwise manner. We previously developed a model for TAM by introducing disease-specific GATA1 mutation in trisomy 21-induced pluripotent stem cells (iPSCs), leading to the production of N-terminally truncated short form of GATA1 (GATA1s). In this model, we used CRISPR/Cas9 to introduce a co-operating mutation in STAG2, a member of the cohesin complex recurrently mutated in DS-ML but not in TAM. Hematopoietic differentiation of GATA1 STAG2 double-mutant iPSC lines confirmed GATA1s expression and the loss of functional STAG2 protein, leading to enhanced production of immature megakaryocytic population compared to GATA1 mutant alone. Megakaryocyte-specific lineage expansion of the double-mutant HSPCs exhibited close resemblance to the DS-ML immunophenotype. Transcriptome analysis showed that GATA1 mutation resulted in downregulation of megakaryocytic and erythrocytic differentiation pathways and interferon α/β signaling, along with an upregulation of pathways promoting myeloid differentiation such as toll-like receptor cascade. The co-occurrence of STAG2 knockout partially reverted the expression of genes involved in myeloid differentiation, likely leading to enhanced self-renewal and promoting leukemogenesis. In conclusion, we developed a DS-ML model via hematopoietic differentiation of gene-targeted iPSCs bearing trisomy 21.