EWS/FLI1, a fusion gene found in Ewing's sarcoma, encodes a transcriptional regulator and promotes cellular transformation by modulating the transcription of specific target genes. We have found that EWS/FLI1 and structurally related fusion proteins upregulate manic fringe (MFNG), a recently described member of the Fringe gene family instrumental in somatic development. MFNG is also expressed in human tumour-derived cell lines expressing EWS/FLI1. Overexpression of MFNG in NIH 3T3 cells renders them tumorigenic in mice with severe combined immunodeficiency disease (SCID). These data demonstrate that part of the oncogenic effect of EWS/FLI1 is to transcriptionally deregulate a member of a family of morphogenic genes.