Pediatric soft tissue tumors are relatively rare and show significant overlap in morphology and immunoprofile, often posing diagnostic and management challenges. Thus, their classification remains often subjective or lumped under "unclassified categories," as a number of lesions lack objective and reproducible criteria in diagnosis. Although in a subset of cases immunohistochemistry has been proved useful to identify a specific line of differentiation, most tumors lack a readily defined histogenesis, being characterized by a rather non-specific immunoprofile. Furthermore, tumors with an ambiguous diagnosis are difficult to grade and their risk of malignancy or clinical management remains uncertain. Advances in molecular genetics, including the more wide application of next generation sequencing in routine clinical practice, have improved diagnosis and refined classification based on objective molecular markers. Importantly, some soft tissue tumors in children are characterized by recurrent gene fusions involving either growth factors (eg, PDGFB) or protein kinases (eg, ALK, ROS, NTRK, BRAF), which have paved the way for new targeted treatments that block the respective upregulated downstream pathways. However, the majority of gene fusions or mutations detected in soft tissue tumors result in an abnormal function of transcription factors or chromatin remodeling. The present review focuses on the latest genetic discoveries in the spectrum of both benign and malignant pediatric soft tissue neoplasia. These genetic abnormalities promise to provide relevant insight for their proper classification, prognosis, and treatment. The entities discussed herein are grouped either based on their shared genetic mechanism or based on their presumed line of differentiation.