The chromosomal translocations t (2; 13)(q35; q14) and t (1; 13)(p36; q14) are characteristic of alveolar rhabdomyosarcoma, a pediatric soft tissue cancer related to the striated muscle lineage. These translocations rearrange PAX3 and PAX7, members of the paired box transcription factor family, and juxtapose these genes with FKHR, a member of the fork head transcription factor family. This juxtaposition generates PAX3–FKHR and PAX7–FKHR chimeric genes that are expressed as chimeric transcripts that encode chimeric proteins. The fusion proteins, which contain the PAX3/PAX7 DNA binding domain and the FKHR transcriptional activation domain, activate transcription from PAX-binding sites with higher potency than the corresponding wild-type PAX proteins. This increased function results from the insensitivity of the FKHR activation domain to inhibitory effects of N-terminal PAX3/PAX7 domains. In addition to altered function, the fusion products are expressed in ARMS tumors at higher levels than the corresponding wild-type PAX products due to two distinct mechanisms. The PAX7–FKHR fusion is overexpressed as a result of in vivo amplification while the PAX3–FKHR fusion is overexpressed due to a copy number-independent increase in transcriptional rate. Finally, though FKHR subcellular localization is regulated by an AKT-dependent pathway, the fusion proteins are resistant to these signals and show exclusively nuclear localization. Therefore, these translocations alter biological activity at the levels of protein function, gene expression, and subcellular localization with the cumulative outcome postulated to be aberrant regulation of PAX3/PAX7 target genes. This aberrant gene expression program is then hypothesized to contribute to tumorigenic behavior by impacting on the control of growth, apoptosis, differentiation and motility.