Molecular characterization of malignant melanoma of soft parts or soft tissue clear cell sarcoma which shares t(12;22) chromosome translocation revealed fusion of EWS with a transcriptional factor gene ATF-1. The EWS gene, which encodes an RNA binding protein, was also shown to be involved in Ewing sarcoma, related primitive neuroectodermal tumors and desmoplastic small round cell tumors. In order to understand the functional role of EWS-ATF-1 chimeric protein in human solid tumors, we have cloned the aberrant human ATF-1 (EWS-ATF-1) cDNA and studied its DNA binding, transcriptional activation properties and compared with normal ATF-1 protein. Our results demonstrate that EWS-ATF-1 binds weakly to DNA in vitro but functions as an efficient constitutive transcriptional activator unlike the normal ATF-1 which needs to be induced with cAMP. Deletion analysis revealed that EWS-fusion domain functions as a regulatory domain for the transcriptional activation properties of EWS-ATF-1 chimeric protein. Deletion of leucine zipper domain results in a loss of transcriptional activation of EWS-ATF-1 chimeric protein suggesting that protein-protein interaction play a role in the transcriptional activation properties of EWS-ATF-1. We demonstrate that EWS-fusion domain negatively regulates the DNA binding activity of EWS-ATF-1 chimeric protein. Therefore replacement of part of the amino-terminal kinase regulatory domain of ATF-1 protein with EWS regulatory domain results in an altered DNA binding, protein-protein interactions and transcriptional activation properties of EWS-ATF-1 causing deregulated gene expression which may be responsible for the genesis of t(12;22) chromosome translocation-bearing human solid tumors. Targeting the transcriptional cofactors (CBP, etc) by EWS-fusion proteins could be one of the mechanisms of activation of EWS-fusion proteins in human neoplasia.