Chromosomal translocations entail the generation of gene fusions in mesenchymal tumors. Despite the successful identification of these specific and consistent genetic events, the nature of the intimate association between the gene fusion and the resulting phenotype still remains to be elucidated. Here these studies are reviewed, using FUS-DDIT3 as a model to illustrate how they have contributed to current understanding in unique and unexpected ways. FUS-DDIT3 is a chimeric oncogene generated by the most common chromosomal translocation t(12;16)(q13;p11) associated with liposarcomas. The application of transgenic methods to the study of this sarcoma-associated FUS-DDIT3 gene fusion has provided insights into their functions in vivo, and suggested mechanisms by which lineage selection may be achieved.