The oncogenic TLS-ERG fusion protein is found in human myeloid leukemia and Ewing's sarcoma as a result of specific chromosomal translocation. To unveil the potential mechanism(s) underlying cellular transformation, we have investigated the effects of TLS-ERG on both gene transcription and RNA splicing. Here we show that the TLS protein forms complexes with RNA polymerase II (Pol II) and the serine-arginine family of splicing factors in vivo. Deletion analysis of TLS-ERG in both mouse L-G myeloid progenitor cells and NIH 3T3 fibroblasts revealed that the RNA Pol II-interacting domain of TLS-ERG resides within the first 173 amino acids. While TLS-ERG repressed expression of the luciferase reporter gene driven by glycoprotein IX promoter in L-G cells but not in NIH 3T3 cells, the fusion protein was able to affect splicing of the E1A reporter in NIH 3T3 cells but not in L-G cells. To identify potential target genes of TLS-ERG, the fusion protein and its mutants were stably expressed in both L-G and NIH 3T3 cells through retroviral transduction. Microarray analysis of RNA samples from these cells showed that TLS-ERG activates two different sets of genes sharing little similarity in the two cell lines. Taken together, these results suggest that the oncogenic TLS-ERG fusion protein transforms hematopoietic cells and fibroblasts via different pathways.