Hematologic responses to hypomethylating agents are often delayed in patients with myelodysplastic syndrome or acute myeloid leukemia. Fetal hemoglobin is a potential novel bio-marker of response: recently, we demonstrated that a high fetal hemoglobin level prior to decitabine treatment was associated with superior outcome. Here we investigated whether early fetal hemoglobin induction during decitabine treatment also had prognostic value, and studied the potential of decitabine to induce erythroid differentiation and fetal hemoglobin expression Fetal hemoglobin levels were measured by high-performance liquid chromatography in patients with higher-risk myelodysplastic syndrome (n=16) and acute myeloid leukemia (n=37) before treatment and after each course of decitabine. Levels above 1.0% were considered induced. Patients achieving complete or partial remission as best response had attained a median fetal hemoglobin of 1.9% after two courses of treatment, whereas the median value in patients who did not reach complete or partial remission was 0.8% ( =0.015). Fetal hemoglobin induction after two courses of decitabine treatment was associated with early platelet doubling ( =0.006), and its subsequent decrease with hematologic relapse. In patients with myelodysplastic syndrome, induction of fetal hemoglobin after course 2 of treatment was associated with longer overall survival: median of 22.9 7.3 months in patients with or without induction of fetal hemoglobin, respectively hazard ratio=0.2 (95% confidence interval: 0.1-0.9); =0.03. decitabine treatment of two bi-potential myeloid leukemia cell lines (K562 and HEL) resulted in induction of an erythroid (not megakaryocytic) differentiation program, and of fetal hemoglobin mRNA and protein, associated with GATA1 gene demethylation and upregulation. In conclusion, fetal hemoglobin may provide a useful dynamic biomarker during hypomethylating agent therapy in patients with myelodysplastic syndrome or acute myeloid leukemia.