One common genetic alteration in cancer is gene fusion resulting from chromosomal translocations. The mechanisms that create such oncogenic fusion genes are not well understood. Previously, we provided the direct evidence that expression of a designed chimeric RNA can drive the formation of TMPRSS2-ERG gene fusion. Central to this RNA-mediated gene fusion mechanism is a proposed three-way junction formed by RNA/DNA hybrid and the intergenic DNA stem formed by target genes. In this study, we determined the important parameters for chimeric RNA-mediated gene fusion using TMPRSS2-ERG fusion gene as the model. Our results indicate that both the chimeric RNA lengths and the sizes of unpaired bulges play important roles in inducing TMPRSS2-ERG gene fusion. The optimal length of unpaired bulges was about 35 nt, while the optimal chimeric RNA length was about 50 nt for targeting. These observations were consistent regardless of the target locations within TMPRSS2 and ERG genes. These empirically determined parameters provide important insight for searching cellular RNAs that may initiate oncogenic fusion genes. The knowledge could also facilitate the development of useful genomic technology for manipulating mammalian genomes.