Pts must have a morphologically confirmed diagnosis of AML per the protocol. Pts must have Zubrod performance status of 0-3. Pts must not have known hypersensitivity to azacitidine, mannitol, hydroxyurea or gemtuzumab ozogamicin. Pts must be at least 60 yrs old. Pts must not have received prior systemic chemotherapy for acute leukemia (except of hydroxyurea; administration of hydroxyurea to control high WBC count prior to registration is permitted). Pts with a history of prior MDS are eligible, however, prior treatment of MDS with AML induction-type chemotherapy or high dose chemotherapy with hematopoietic stem cell support is not allowed. Pts may have received hematopoietic growth factors, thalidomide, lenalidomide, arsenic trioxide, signal transduction inhibitors and low dose cytarabine for treatment of myelodysplastic syndrome, however, the dose of cytarabine must be < 100 mg/m2/day. Pts with previous therapy with azacitidine, decitabine and gemtuzumab ozogamicin (Mylotarg®) are not eligible. Pts must be off prior therapy for MDS at least 30 days prior to study registration; all toxicities must have resolved. Pts must have a bilirubin </= 2.0 x Institutional Upper Limit of Normal (IULN) within 14 days prior to registration, unless the elevation is believed to be due to hepatic infiltration by AML; hyperbilirubinemia due primarily to elevated unconjugated hyperbilirubinemia secondary to Gilbert's syndrome or hemolysis is allowed. Pts must have SGOT (AST) </= 2.0 x IULN, or SGPT (ALT) </= 2.0 x IULN, or both within 14 days prior to registration, unless the elevation is believed to be due to hepatic infiltration by AML. (If both tests are performed they should both be within the specified limits.) Pts must have a serum creatinine </= 1.5 x IULN within 14 days prior to registration. Pts must have an adequate cardiac function with left ventricular ejection fraction of >/= 40% (as determined by either MUGA or ECG) and no clinical evidence of congestive heart failure within 56 days prior to registration. Pts must have specimens submitted for cytogenetics. Pts must submit specimens for cellular and molecular studies and be offered participation in banking. Pts must not have CNS involvement. If central nervous involvement is clinically suspected, it must be ruled out by a lumbar puncture. Women of reproductive potential must have a pregnancy test within 28 days prior to registration. Pts must not be pregnant or nursing. Women/men of reproductive potential must have agreed to use an effective contraceptive method. Pts not known to be HIV+ must be tested for HIV infection within 14 days prior to registration. Pts who are HIV+ may be eligible providing: they have no history of AIDS defining events, CD4 cells >/= 500/mm3, viral load < 50 copies HIV mRNA/mm3 if on cART or < 25,000 copies HIV mRNA if not on cART and no zidovudine or stavudine as part of cART. Pts must not have prior malignancy except: a) adequately treated basal cell or squamous cell skin cancer, or b) any diagnosis of malignancy made at least 2 years earlier, of which there is no clinically evident cancer, and for which the patient has completed all chemotherapy and radiotherapy at least 6 months prior to registration. Prior treatment with AML induction-type chemotherapy is not allowed. Concurrent hormonal therapy is allowed.