Chronic lymphocytic leukemia (CLL) is the most common form of leukemia in adults in the Western hemisphere. Tumor-specific chromosomal translocations, characteristic findings in several human malignancies that directly lead to malignant transformation, have not been identified in CLL. Using paired-end transcriptome sequencing, we identified recurrent and reciprocal RNA chimeras involving yippee like 5 (YPEL5) and serine/threonine-protein phosphatase PP1-beta-catalytic subunit (PPP1CB) in CLL. Two of seven index cases (28%) harbored the reciprocal RNA chimeras in our initial screening. Using quantitative real-time PCR (q real-time PCR), YPEL5/PPP1CB and PPP1CB/YPEL5 fusion transcripts were detected in 97 of 103 CLL samples (95%) but not in paired normal samples, benign lymphocytes, or various unrelated cancers. Whole-genome sequencing and Southern blotting demonstrated no evidence for a genomic fusion between YPEL5 and PPP1CB. YPEL5/PPP1CB chimera, when introduced into mammalian cells, expressed a truncated PPP1CB protein that demonstrated diminished phosphatase activity. PPP1CB silencing resulted in enhanced proliferation and colony formation of MEC1 and JVM3 cells, implying a role in the pathogenesis of mature B-cell leukemia. These studies uncover a potential role for recurrent RNA chimeras involving phosphatases in the pathogenesis of a common form of leukemia.