We previously reported a novel fusion between TEL and FGFR3 in a patient with peripheral T-cell lymphoma with t(4; 12)(p16;p13). Disease in this patient subsequently progressed to acute myelogenous leukemia (AML) with the same translocation. Sequence analysis of TEL-FGFR3 fusion transcripts suggested that these diseases originated from the same multipotent stem cell. To determine the transforming property of TEL-FGFR3, we established transfectants of this chimeric fusion gene and investigated the major signal pathways of TEL-FGFR3-induced transformation using various signal transduction inhibitors including SU5402 (fibroblast growth factor tyrosine kinase [FGFR TK] inhibitor). Our results indicated that (1) the expression of TEL-FGFR3 but not DeltaHLH-TEL-FGFR3 resulted in efficient focus formation in NIH/3T3 cells and conferred interleukin 3 independence to Ba/F3 cells by a constitutive tyrosine kinase activity probably through oligomerization by the HLH domain of TEL; (2) although effector proteins including classical mitogen-activated protein kinase (MAPK), p38 MAPK, phosphatidylinositol 3-kinase (PI3-K), mammalian target or rapamycin (mTOR), signal transducer and activator of transcription 3 (STAT-3) and STAT-5 were activated in TEL-FGFR3 transformants, the growth of the transformants was inhibited by SU5402 (concentration that inhibits 50% [IC5)]=5 microM) and the PI3-K inhibitor, LY294002 (IC5)=10 microM) and wortmannin (IC50=5 microM), but not by U0126, SB203580, or rapamycin; and (3) injection of TEL-FGFR3 transformants induced lethal leukemia into syngeneic mice. Taken together, the leukemogenic potential of TEL-FGFR3 may be mediated in part through PI3-K.