Human myxoid liposarcomas contain a characteristic chromosomal translocation, t(12;16)(q13;p11), that is associated with a structural rearrangement of the gene encoding CHOP, a growth arrest and DNA-damage inducible member of the C/EBP family of transcription factors residing on 12q13.1. Using a CHOP-specific complementary probe and antiserum we report here the presence of an abnormal CHOP transcript and protein in these tumours. Cloning of the translocation-associated CHOP gene product revealed a fusion between CHOP and a gene provisionally named TLS (translocated in liposarcoma). TLS is a novel nuclear RNA-binding protein with extensive sequence similarity to EWS, the product of a gene commonly translocated in Ewing's sarcoma. In TLS-CHOP the RNA-binding domain of TLS is replaced by the DNA-binding and leucine zipper dimerization domain of CHOP. Targeting of a conserved effector domain of RNA-binding proteins to DNA may play a role in tumour formation.