Alveolar rhabdomyosarcoma, a malignant tumor of skeletal muscle, is characterized by a chromosomal translocation, t(2;13)(q35;q14). This translocation is associated with a structural rearrangement of the gene encoding PAX3, a presumed transcriptional regulator expressed exclusively during embryogenesis. The breakpoint results in a fusion between PAX3 and a gene provisionally named ALV, a novel member of the forkhead family of transcription factors. In PAX3-ALV, the structural integrity of both PAX3 DNA-binding regions, the paired box and homeodomain, are retained while the putative transcriptional activation domain of PAX3 is replaced by the bisected forkhead DNA-binding domain of ALV. Formation of chimeric transcription factors has now been implicated in diverse human tumors of myogenic, hematopoietic, neuroectodermal, and adipocytic origin, suggesting that transcriptional deregulation is a common mechanism of tumorigenesis.