Chondroid lipoma, a rare benign adipose tissue tumor, may histologically resemble myxoid liposarcoma or extraskeletal myxoid chondrosarcoma, but is genetically distinct. In the current study, an identical reciprocal translocation, t(11;16)(q13;p13) was identified in three chondroid lipomas, a finding consistent with previous isolated reports. A fluorescence in situ hybridization (FISH)-based positional cloning strategy using a series of bacterial artificial chromosome (BAC) probe combinations designed to narrow the 16p13 breakpoint revealed MKL2 as the candidate gene. Subsequent 5′ RACE studies demonstrated C11orf95 as the MKL2 fusion gene partner. MKL/myocardin-like 2 (MKL2) encodes myocardin-related transcription factor B (MRTF-B) in a megakaryoblastic leukemia gene family, and C11orf95 (chromosome 11 open reading frame 95) is a hypothetical protein. Sequencing analysis of RT-PCR generated transcripts from all three chondroid lipomas defined the fusion as occurring between exons 5 and 9 of C11orf95 and MKL2, respectively. Dual-color breakpoint spanning probe sets custom-designed for recognition of the translocation event in interphase cells confirmed the anticipated rearrangements of the C11orf95 and MKL2 loci in all cases. The FISH and RT-PCR assays developed in this study can serve as diagnostic adjuncts for identification of this novel C11orf95-MKL2 fusion oncogene in chondroid lipoma.