Aplastic anemia (AA) is a heterogeneous disorder. The distinction between acquired AA and hypocellular myelodysplastic syndrome (hMDS) is often difficult, especially non-severe AA. Definition of hMDS is based solely on morphological changes in blood and bone marrow. We postulated that somatic mutations are present in a subset of AA, and predict malignant transformation. From our database of 345 AA patients, we identified 150 patients with no morphological evidence of MDS, who had stored BM and constitutional DNA. We excluded Fanconi anemia, mutations of telomere maintenance, and a family history of bone marrow failure (BMF) or cancer. The initial cohort of 57 patients was screened for 835 known genes associated with BMF and myeloid cancer; a second cohort of 93 patients was screened for mutations in ASXL1, DNMT3A, BCOR, TET2, and MPL. Somatic mutations were detected in 19% of AA, and included ASXL1 (n=12), DNMT3A (n=8) and BCOR (n=6). Patients with somatic mutations had a longer disease duration (37 vs. 8 months, p<0.04), and shorter telomere lengths (median T/S length, 0.9 vs. 1.1, p<0.001), compared to patients without mutations. Somatic mutations in AA patients with disease duration of > 6 months were associated with 40% risk of transformation to MDS (p <0.0002). Nearly a fifth of AA patients harbor mutations in genes typically seen in myeloid malignancies that predicted for later transformation to MDS.