Myxoid liposarcomas are characterized by t(12; 16)(q13;p11) translocation and expression of TLS/ FUS-CHOP chimeric transcripts (types I to III). Among these, the type II transcript is expressed in the majority of cases of myxoid and round cell liposarcoma. To investigate the function of the type II chimeric protein, we obtained stable transformants of ST-13, a murine preadipocytic cell line, which express TLS/FUS-CHOP type II protein (ST-TC) or CHOP protein (ST-C) as well as vector-transfected controls (ST-V). ST-TC and ST-C cells showed almost complete or partial resistance to adipogenic conversion by insulin and thiazolidinedione, respectively. Induction by adipogenic stimulation of the adipocytic genes such as C/EBP alpha, aP2, and adipsin was almost totally suppressed in the ST-TC cells, whereas in ST-C cells C/EBP alpha alone was induced without induction of aP2 and adipsin. Transcriptional suppression of the C/EBP alpha gene in ST-TC cells was suggested by the results of chloramphenicol acetyltransferase (CAT) assay showing a significantly lower C/EBP alpha promoter activity compared with findings in ST-C and ST-V cells. Failure to rescue adipogenic conversion by ectopic expression of C/EBP alpha in ST-TC cells suggested a functional impairment of C/EBP alpha to induce expression of downstream genes. TLS/FUS-CHOP type II protein showed transforming activity, as evidenced by loss of contact inhibition of growth, anchorage-independent growth in soft agar, and tumor formation in nude mice, showing typical histological features of myxoid liposarcoma seen in humans. These findings suggest important roles for TLS/FUS-CHOP type II protein in the oncogenesis of myxoid liposarcoma.