Heterozygous mutations in the gene predispose women to breast and ovarian cancer, while biallelic BRCA1 mutations are a cause of Fanconi anemia (FA), a rare genetic disorder characterized by developmental abnormalities, early-onset bone marrow failure, increased risk of cancers, and hypersensitivity to DNA-crosslinking agents. BRCA1 is critical for homologous recombination of DNA double-strand breaks (DSB). Through its coiled-coil domain, BRCA1 interacts with an essential partner, PALB2, recruiting BRCA2 and RAD51 to sites of DNA damage. Missense mutations within the coiled-coil domain of BRCA1 (e.g., L1407P) that affect the interaction with PALB2 have been reported in familial breast cancer. We hypothesized that if PALB2 regulates or mediates BRCA1 tumor suppressor function, ablation of the BRCA1-PALB2 interaction may also elicit genomic instability and tumor susceptibility. We generated mice defective for the Brca1-Palb2 interaction (Brca1 L1363P in mice) and established MEF cells from these mice. MEF exhibited hypersensitivity to DNA-damaging agents and failed to recruit Rad51 to DSB. mice were viable but exhibited various FA symptoms including growth retardation, hyperpigmentation, skeletal abnormalities, and male/female infertility. Furthermore, all mice exhibited macrocytosis and died due to bone marrow failure or lymphoblastic lymphoma/leukemia with activating Notch1 mutations. These phenotypes closely recapitulate clinical features observed in patients with FA. Collectively, this model effectively demonstrates the significance of the BRCA1-PALB2 interaction in genome integrity and provides an FA model to investigate hematopoietic stem cells for mechanisms underlying progressive failure of hematopoiesis and associated development of leukemia/lymphoma, and other FA phenotypes. SIGNIFICANCE: A new Brca1 mouse model for Fanconi anemia (FA) complementation group S provides a system in which to study phenotypes observed in human FA patients including bone marrow failure. .