Rhabdomyosarcoma (RMS) is a family of soft tissue cancers that are related to the skeletal muscle lineage and predominantly occur in children and young adults. A specific chromosomal translocation t(2;13)(q35;q14) that gives rise to the chimeric oncogenic transcription factor PAX3-FOXO1 has been identified as a hallmark of the aggressive alveolar subtype of RMS. PAX3-FOXO1 cooperates with additional molecular changes to promote oncogenic transformation and tumorigenesis in various human and murine models. Its expression is generally restricted to RMS tumor cells, thus providing a very specific target for therapeutic approaches for these RMS tumors. In this article, we review the recent understanding of PAX3-FOXO1 as a transcription factor in the pathogenesis of this cancer and discuss recent developments to target this oncoprotein for treatment of RMS.