Over 70% of diffuse intrinsic pediatric gliomas, an aggressive brainstem tumor, harbor heterozygous mutations that create a K27M amino acid substitution (methionine replaces lysine 27) in the tail of histone H3.3. The role of the H3.3K27M mutation in tumorigenesis is not fully understood. Here, we use a human embryonic stem cell system to model this tumor. We show that H3.3K27M expression synergizes with p53 loss and PDGFRA activation in neural progenitor cells derived from human embryonic stem cells, resulting in neoplastic transformation. Genome-wide analyses indicate a resetting of the transformed precursors to a developmentally more primitive stem cell state, with evidence of major modifications of histone marks at several master regulator genes. Drug screening assays identified a compound targeting the protein menin as an inhibitor of tumor cell growth in vitro and in mice.