In Ewing tumor, the (11;22) chromosomal translocation produces a chimeric molecule composed of the amino-terminal domain of EWS fused to the carboxyl-terminal DNA-binding domain of FLI-1. Previously, we have identified a novel protein TAFII68, which is highly similar to EWS and another closely related protein TLS (also called FUS). We demonstrate that the N-terminus of TAFII68 efficiently stimulates transcription when fused to two different DNA binding domains and that overexpression of TAFII68-FLI-1 chimeras in NIH3T3 cells leads to oncogenic transformation. We have also investigated the molecular mechanisms which could account for the transcriptional activation and the oncogenic transformation potential of the N-termini of TAFII68 and EWS. Thus, we have tested whether the artificial recruitment of components of the preinitiation complex (PIC) or a histone acetyltransferase (HAT) could bypass the requirement for the activation domains of either EWS or TAFII68. Recruitment of individual components of the transcription machinery or the GCN5 HAT is not sufficient to promote activation from FLI-1 responsive genes either in transfection experiments or in oncogenic transformation assays. These results suggest that the TAFII68 or EWS activation domains enhance a step after PIC formation in the transcriptional activation process.