In this study, we present the development of the Mutation tagging by CRISPR-based Ultra-precise Targeted Elimination in Sequencing (MUTE-Seq) method. We engineered a highly precise advanced-fidelity FnCas9 variant, named FnCas9-AF2, to effectively discriminate single-base mismatches at all positions of the single guide RNA (sgRNA) target sequences. FnCas9-AF2 exhibited significantly lower off-target effects compared to existing high-fidelity CRISPR-Cas9 variants. MUTE-Seq leverages FnCas9-AF2 for the enrichment of mutant DNA through the exclusive cleavage of perfectly matched wild-type DNA, allowing for sensitive detection of low-frequency cancer-associated mutant alleles. MUTE-Seq enabled sensitive monitoring of minimal residual disease (MRD) from the bone marrow of patients with Acute Myeloid Leukemia (AML). Furthermore, MUTE-Seq was applied in a multiplexed manner on cell-free DNA (cfDNA) from patients diagnosed with non-small cell lung cancer (NSCLC) and pancreatic cancer. This approach demonstrated a significant improvement in the sensitivity of simultaneous mutant detection and highlighted its clinical utility for early-stage cancer patients with extremely low levels of circulating tumor DNA (ctDNA). We anticipate that the FnCas9-AF2-based MUTE-Seq could offer a valuable clinical tool to facilitate improved molecular diagnosis, prognosis evaluation, and treatment planning for cancers in various stages.