Acute myeloid leukemia (AML) is characterized by accumulation of myeloid cells in the bone marrow because of impaired differentiation and proliferation, resulting in hematopoietic insufficiency. NPM1 is one of the most commonly mutated genes in AML, present in 20–30% of cases. Mutations in NPM1 represent a distinct entity in the World Health Organization (WHO) classification and commonly indicate a better risk prognosis. In this review, we discuss the many functions of NPM1, the consequence of mutations in NPM1 and possible mechanisms through which mutations lead to leukemogenesis. We also discuss clinical consequences of mutations, associated gene expression patterns and the role of NPM1 mutations in informing prognosis and therapeutic decisions and predicting relapse in AML.