Non-coding variants coordinate transcription factor (TF) binding and chromatin mark enrichment changes over regions spanning >100 kb. These molecularly coordinated regions are named "variable chromatin modules" (VCMs), providing a conceptual framework of how regulatory variation might shape complex traits. To better understand the molecular mechanisms underlying VCM formation, here, we mechanistically dissect a VCM-modulating noncoding variant that is associated with reduced chronic lymphocytic leukemia (CLL) predisposition and disease progression. This common, germline variant constitutes a 5-bp indel that controls the activity of an AXIN2 gene-linked VCM by creating a MEF2 binding site, which, upon binding, activates a super-enhancer-like regulatory element. This triggers a large change in TF binding activity and chromatin state at an enhancer cluster spanning >150 kb, coinciding with subtle, long-range chromatin compaction and robust AXIN2 up-regulation. Our results support a model in which the indel acts as an AXIN2 VCM-activating TF nucleation event, which modulates CLL pathology.