Clear cell sarcoma (CCS) is a rare soft tissue sarcoma caused by the EWS/ATF1 fusion gene. Here, we established induced pluripotent stem cells (iPSCs) from EWS/ATF1-controllable murine CCS cells harboring sarcoma-associated genetic abnormalities. Sarcoma-iPSC mice develop secondary sarcomas immediately after EWS/ATF1 induction, but only in soft tissue. EWS/ATF1 expression induces oncogene-induced senescence in most cell types in sarcoma-iPSC mice but prevents it in sarcoma cells. We identify Tppp3-expressing cells in peripheral nerves as a cell-of-origin for these sarcomas. We show cell type-specific recruitment of EWS/ATF1 to enhancer regions in CCS cells. Finally, epigenetic silencing at these enhancers induces senescence and inhibits CCS cell growth through altered EWS/ATF1 binding. Together, we propose that distinct responses to premature senescence are the basis for the cell type-specificity of cancer development.