Recurrent mutations in the splicing factor U2AF35 are found in several cancers and myelodysplastic syndrome (MDS). How oncogenic U2AF35 mutants promote transformation remains to be determined. Here we derive cell lines transformed by the oncogenic U2AF35(S34F) mutant and identify aberrantly processed pre-mRNAs by deep sequencing. We find that in U2AF35(S34F)-transformed cells the autophagy-related factor 7 (Atg7) pre-mRNA is abnormally processed, which unexpectedly is not due to altered splicing but rather selection of a distal cleavage and polyadenylation (CP) site. This longer Atg7 mRNA is translated inefficiently, leading to decreased ATG7 levels and an autophagy defect that predisposes cells to secondary mutations, resulting in transformation. MDS and acute myeloid leukemia patient samples harboring U2AF35(S34F) have a similar increased use of the ATG7 distal CP site, and previous studies have shown that mice with hematopoietic cells lacking Atg7 develop an MDS-like syndrome. Collectively, our results reveal a basis for U2AF35(S34F) oncogenic activity.