EWS and TLS/FUS genes, which code for RNA binding proteins are involved in a wide variety of human solid tumors. The TLS/FUS gene is involved both in human myxoid liposarcomas which carry a characteristic chromosomal translocation, t(12;16)(q13;p11) and in human myeloid leukemias with recurrent chromosomal translocation, t(16;21)(p11:q22). The TLS/FUS gene is fused to a transcriptional repressor, CHOP (in human myxoid liposarcomas) or transcriptional activator, erg (in human myeloid leukemias). To understand better the functional role of TLS/FUS-erg in human myeloid leukemias, we have cloned the TLS/FUS and TLS/FUS-erg cDNAs and studied the functional properties of their gene products. TLS/FUS protein binds to RNA in vitro and shows preferential binding to poly G. Both the amino- and the carboxy- terminal regions of TLS/FUS containing the conserved RNA binding motifs are needed for poly G specific RNA binding activity. The TLS/FUS fusion domain (TFD) appears to regulate the DNA binding activity of TLS/FUS-erg chimeric protein which shows weaker transcriptional activation properties compared to normal erg proteins. Mutational analysis of the TLS/FUS-erg chimeric protein reveals TFD to function as a transcriptional activation domain thus replacing the amino terminal transcriptional activation domain of the erg protein. Therefore alterations in both DNA binding and transcriptional activation properties of aberrant erg proteins may be responsible for the genesis of t(16;21) chromosomal translocation-bearing human myeloid leukemias.