PURPOSE: Alveolar rhabdomyosarcoma (ARMS) is an aggressive soft tissue malignancy of children and adolescents. Most ARMS patients express PAX3-FKHR or PAX7-FKHR gene fusions resulting from t(2;13) or t(1;13) translocations, respectively. We wished to confirm the diagnostic specificity of gene fusion detection in a large cohort of RMS patients and to evaluate whether these alterations influence clinical outcome in ARMS. PATIENTS AND METHODS: We determined PAX3-FKHR or PAX7-FKHR fusion status in 171 childhood rhabdomyosarcoma (RMS) patients entered onto the Intergroup Rhabdomyosarcoma Study IV, including 78 ARMS patients, using established reverse transcriptase polymerase chain reaction assays. All patients received central pathologic review and were treated using uniform protocols, allowing for meaningful outcome analysis. We examined the relationship between gene fusion status and clinical outcome in the ARMS cohort. RESULTS: PAX3-FKHR and PAX7-FKHR fusion transcripts were detected in 55% and 22% of ARMS patients, respectively; 23% were fusion-negative. All other RMS patients lacked transcripts, confirming the specificity of these alterations for ARMS. Fusion status was not associated with outcome differences in patients with locoregional ARMS. However, in patients presenting with metastatic disease, there was a striking difference in outcome between PAX7-FKHR and PAX3-FKHR patient groups (estimated 4-year overall survival rate of 75% for PAX7-FKHR v 8% for PAX3-FKHR; P = .0015). Multivariate analysis demonstrated a significantly increased risk of failure (P = .025) and death (P = .019) in patients with metastatic disease if their tumors expressed PAX3-FKHR. Among metastatic ARMS, bone marrow involvement was significantly higher in PAX3-FKHR–positive patients. CONCLUSION: Not only are PAX-FKHR fusion transcripts specific for ARMS, but expression of PAX3-FKHR and PAX7-FKHR identifies a very high-risk subgroup and a favorable outcome subgroup, respectively, among patients presenting with metastatic ARMS.