Rhabdomyosarcoma (RMS) is a soft-tissue sarcoma subtype composed of malignant immature precursor cells with myogenic differentiation defined by aberrant expression of the transcription factors MYOD1 and MYOG. Four subtypes are distinguished, characterized by considerable clinical, histologic, and genetic heterogeneity. RMS with fusions of the transcription factor TFCP2 to either FUS or EWSR1 has only recently been observed, but its classification and pathogenesis are unclear. We studied the clinical course, histopathology, and molecular landscape of 12 cases of this new RMS type and determined the functional properties of tumor-specific genetic alterations. Unusually for gene fusion-driven sarcomas, most tumors had highly rearranged genomes, including chromothripsis, and signs of defective homologous recombination DNA repair. All tumors were characterized by extremely high expression of a truncated TERT variant and the receptor tyrosine kinase ALK. The latter was additionally affected by intragenic deletions (33%), which resulted, together with aberrant splicing events, in the expression of shortened ALK variants (58%). Three ALK variants were oncogenic in immortalized cells in vitro and after xenotransplantation in mice and responded variably to different ALK inhibitors. Additional recurrent alterations included CDKN2A/MTAP co-deletions (67%) and mutations in PAPPA2 (25%) encoding an IGFBP5-specific proteinase. DNA methylation analysis of FUS/EWSR1-TFCP2 RMS, along with 19 other soft-tissue sarcoma types, revealed a close relationship with undifferentiated sarcoma but not with other RMS subtypes, suggesting that FUS/EWSR1-TFCP2 RMS is a distinct sarcoma entity possibly arising from a different cell of origin than other RMS types. Transduction of TFCP2 fusions into immortalized human cells conferred anchorage-independent growth and blocked late myogenic differentiation. Genes significantly induced in these cells were also highly expressed in patient tumors, including ALK, TERT, and two known regulators of skeletal muscle cells, IGFBP5 and PTH1R. ACT-seq demonstrated direct binding of FUS-TFCP2 to the ALK and TERT gene loci outside their regular promoters, which correlated with the expression of alternative transcript variants. Finally, FUS-TFCP2 appeared to induce a defect in DNA double-strand repair in immortalized cells, rendering them sensitive to treatment with cisplatin. Together, our study gives insights into the pathogenesis of a new RMS subtype defined by FUS-TFCP2 or EWSR1-TFCP2 fusions and suggests entry points for therapeutic intervention with DNA-damaging agents, ALK inhibitors, and, in the case of additional CDKN2A/MTAP co-deletion, drugs targeting PRMT5. Citation Format: Julia Schoepf, Sebastian Uhrig, Christoph E. Heilig, Kwang-Seok Lee, Tatjana Walther, Alexander Carazzato, Anna Maria Dobberkau, Dieter Weichenhan, Christoph Plass, Mark Hartmann, Gaurav Diwan, Zunamys Carrero, Claudia R. Ball, Tobias Hohl, Thomas Kindler, Patricia Rudolph-Hähnel, Anna Nilsson, Ingrid Øra, Roland Imle, Ana Banito, Robert Russell, Barbara C. Jones, Daniel B. Lipka, Hanno Glimm, Daniel Hübschmann, Wolfgang Hartmann, Stefan Fröhling, Claudia Scholl. Genomic, transcriptomic, functional, and mechanistic characterization of rhabdomyosarcoma with FUS-TFCP2 or EWSR1-TFCP2 fusions. [abstract]. In: Proceedings of the American Association for Cancer Research Annual Meeting 2023; Part 1 (Regular and Invited Abstracts); 2023 Apr 14-19; Orlando, FL. Philadelphia (PA): AACR; Cancer Res 2023;83(7_Suppl):Abstract nr 4544.