The purpose of this research study is to find out what effects, good and/or bad, erlotinib has on the patient and their myelodysplastic syndrome. Erlotinib has been approved by the Food and Drug Administration (FDA) to treat non-small cell lung cancer; however, erlotinib use in this study is considered investigational as the FDA has not approved it for the treatment of myelodysplastic syndrome.

Screening Period: Informed consent, physical examination, medical history report, blood tests, pregnancy test (if applicable), list of current medications, description of symptoms, chest x-ray, ECG, bone marrow aspirate/biopsy within 4 weeks of study start.

Weeks 2,6,10 and 14: Blood tests.

Weeks 4 and 12: Blood tests, physical exam, patients will answer question about how they are feeling and if there are any changes to medication they have taken.

Weeks 8 and 16: Blood tests, physical exam, patients will answer question about how they are feeling and if there are any changes to medication they have taken, bone marrow aspirate/biopsy (if physician has determined the patient has had a clinical response or partial response to treatment.

After week 16 (if responding to treatment): Have a bone marrow aspirate/biopsy (will be repeated at time of relapse, i.e., more than 50% increase in the percentage of myeloblasts [leukemia cells] or drop in blood counts after they improved or requiring regular blood transfusions after not requiring them for at least 8 weeks, or after 1 year in study).

After the patient has stopped taking erlotinib: Periodic follow-up on patients' status.

Inclusion Criteria:

• Patients must have an established diagnosis of myelodysplastic syndrome (MDS) and have either: Low or intermediate 1 risk disease by International Prognostic Scoring System (IPSS) for MDS with symptomatic anemia (defined as hemoglobin less than 10.0 g/dl) or transfusion dependent anemia (defined as requiring ≥ 4 units of red blood cells (RBCs) administered with a pretreatment hemoglobin value of ≤ 9 g/dL in the 8 weeks prior to Day 1 of treatment in this study). Patients with anemia must have no response to at least to 6 weeks trial of erythroid stimulating agents (ESA) [erythropoietin/ darbepoetin]. Patients with serum erythropoietin levels more than 500 mU/ ml on diagnosis are eligible to the study without erythropoietin/darbepoetin prior treatment. Patients who do not meet anemia criteria are still eligible if they had thrombocytopenia with two or more platelet counts < 50 x 10^9/L or a significant clinical hemorrhage requiring platelet transfusions or if they had neutropenia with an absolute neutrophil count (ANC) < 1 x 10^9/L; Intermediate-2 or high risk MDS by IPSS.
• Patients ≥ 60 years with Acute Myeloid Leukemia (AML) by WHO classification and myeloblasts percentage 20-30% (RAEB-t by MDS French-American-British (FAB) classification) are eligible for the study if deemed not suitable for induction chemotherapy or declined that option.
• All prior treatment must have been discontinued 28 days prior to Day 1 of treatment in this study except (ESA) and colony stimulating factors where it should be stopped 14 days prior to start therapy on study, and hydroxyurea should be stopped 2 days before.
• Prior bone marrow or stem cell transplant is allowed.
• Secondary or therapy related MDS patients are eligible.
• Patients with chronic myelomonocytic leukemia (CMML) are eligible.
• Patients must have a performance status of 0 - 2 by Zubrod performance status criteria.
• Pretreatment pathology materials must be available for morphologic review. Collection of blood and marrow specimens for pathology review must be completed within 28 days prior to registration.
• No other prior malignancy is allowed except for the following: adequately treated basal cell or squamous cell skin cancer, in situ cervical cancer, adequately treated Stage I or II cancer from which the patient is currently in complete remission, or any other cancer from which the patient has been disease-free for at least 2 years.
• In calculating days of tests and measurements, the day a test or measurement is done is considered Day 0. Therefore, if a test is done on a Monday, the Monday four weeks later would be considered Day 28. This allows for efficient patient scheduling without exceeding the guidelines. If Day 28 or 60 falls on a weekend or holiday, the limit may be extended to the next working day.
• All patients must be informed of the investigational nature of this study and must sign and give written consent in accordance with institutional and federal guidelines.

Exclusion Criteria:

• Patients must not have received prior remission induction chemotherapy as treatment for MDS.
• Patients must not be pregnant or nursing because of the potential risks of the drugs used in this study. Women/men of reproductive potential may not participate unless they have agreed to use an effective contraceptive method.
• Patients who are known HIV positive are not eligible for this study.

4 of the initial 39 patients were found to be ineligible after signing informed consent.

1 year, 9 months