In the pediatric cancer alveolar rhabdomyosarcoma (ARMS), the 2;13 chromosomal translocation juxtaposes the PAX3 and FKHR genes to generate a chimeric transcription factor. To explore molecular pathways altered by this oncoprotein, we generated an inducible form by fusing PAX3-FKHR to a modified estrogen receptor ligand-binding domain and expressed this construct in the RD embryonal rhabdomyosarcoma cell line. This inducible system permits short-term evaluation of downstream expression targets of PAX3-FKHR and complements a panel of stable long-term RD subclones constitutively expressing PAX3-FKHR. Using these two sets of resources, we investigated several candidate PAX3-FKHR target genes. First, we demonstrated in both short-term and long-term systems that PAX3-FKHR upregulates expression of the gene encoding the chemokine receptor CXCR4. In addition, we found that expression of wild-type PAX3 is upregulated, whereas expression of wild-type PAX7 is downregulated by PAX3-FKHR. In the presence of cycloheximide, CXCR4 and PAX3 are still inducible, supporting the hypothesis that these genes are direct transcriptional targets of PAX3-FKHR. Finally, studies of ARMS tumors revealed CXCR4, PAX3, and PAX7 expression levels consistent with our cell culture results. These findings of genes regulated by PAX3-FKHR will direct future biological and clinical investigation to important pathways contributing to ARMS tumorigenesis and progression.