The application of molecular genetics to pediatric soft tissue tumors has grown tremendously over the last decade. It has resulted in the identification of novel genes that have provided us with an increased understanding of oncogenesis. Furthermore, these findings have identified diagnostic and potentially prognostic factors for patient management. Molecular diagnostic techniques, such as reverse transcription PCR (RT-PCR) and fluorescence in situ hybridization (FISH), have become important tools for evaluating pediatric soft tissue tumors. By detecting characteristic fusion genes, these techniques have greatly increased the diagnostic accuracy of histopathological classification. One of the exciting promises of the development of these molecular techniques is their ability to detect micrometastasis and minimal residual disease. Monitoring of minimal residual disease in pediatric soft tissue tumors by quantitative RT-PCR may provide important prognostic information. Furthermore, the potential development of targeted therapy based on the understanding of the molecular pathology of a specific soft tissue tumor may complement existing treatments and improve disease outcome.