Background Aberrant epigenetic patterns are central in the pathogenesis of haematopoietic diseases such as myelodysplastic syndromes (MDS) and acute myeloid leukaemia (AML). Vorinostat is a HDACi which has produced responses in these disorders. The purpose of this study was to address the functional effects of vorinostat in leukemic cell lines and primary AML and MDS myeloid cells and to dissect the genetic and molecular mechanisms by which it exerts its action. Methodology/Principal Findings Functional assays showed vorinostat promoted cell cycle arrest, inhibited growth, and induced apoptosis and differentiation of K562, HL60 and THP-1 and of CD33+ cells from AML and MDS patients. To explore the genetic mechanism for these effects, we quantified gene expression modulation by vorinostat in these cells. Vorinostat increased expression of genes down-regulated in MDS and/or AML (cFOS, COX2, IER3, p15, RAI3) and suppressed expression of genes over-expressed in these malignancies (AXL, c-MYC, Cyclin D1) and modulated cell cycle and apoptosis genes in a manner which would favor cell cycle arrest, differentiation, and apoptosis of neoplastic cells, consistent with the functional assays. Reporter assays showed transcriptional effect of vorinostat on some of these genes was mediated by proximal promoter elements in GC-rich regions. Vorinostat-modulated expression of some genes was potentiated by mithramycin A, a compound that interferes with SP1 binding to GC-rich DNA sequences, and siRNA-mediated SP1 reduction. ChIP assays revealed vorinostat inhibited DNA binding of SP1 to the proximal promoter regions of these genes. These results suggest vorinostat transcriptional action in some genes is regulated by proximal promoter GC-rich DNA sequences and by SP1. Conclusion This study sheds light on the effects of vorinostat in AML and MDS and supports the implementation of clinical trials to explore the use of vorinostat in the treatment of these diseases.