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Additional sex combs-like 1 (ASXL1) interacts with BRCA1-associated protein 1 (BAP1) deubiquitinase to oppose the polycomb repressive complex 1 (PRC1)-mediated histone H2A ubiquitylation. Germline BAP1 mutations are found in a spectrum of human malignancies, while ASXL1 mutations recurrently occur in myeloid neoplasm and are associated with poor prognosis. Nearly all ASXL1 mutations are heterozygous frameshift or nonsense mutations in the middle or to a less extent the C-terminal region, resulting in the production of C-terminally truncated mutant ASXL1 proteins. How ASXL1 regulates specific target genes and how the C-terminal truncation of ASXL1 promotes leukemogenesis are unclear. Here, we report that ASXL1 interacts with forkhead transcription factors FOXK1 and FOXK2 to regulate a subset of FOXK1/K2 target genes. We show that the C-terminally truncated mutant ASXL1 proteins are expressed at much higher levels than the wild-type protein in ASXL1 heterozygous leukemia cells, and lose the ability to interact with FOXK1/K2. Specific deletion of the mutant allele eliminates the expression of C-terminally truncated ASXL1 and increases the association of wild-type ASXL1 with BAP1, thereby restoring the expression of BAP1-ASXL1-FOXK1/K2 target genes, particularly those involved in glucose metabolism, oxygen sensing, and JAK-STAT3 signaling pathways. In addition to FOXK1/K2, we also identify other DNA-binding transcription regulators including transcription factors (TFs) which interact with wild-type ASXL1, but not C-terminally truncated mutant. Our results suggest that ASXL1 mutations result in neomorphic alleles that contribute to leukemogenesis at least in part through dominantly inhibiting the wild-type ASXL1 from interacting with BAP1 and thereby impairing the function of ASXL1-BAP1-TF in regulating target genes and leukemia cell growth.