Human myxoid liposarcoma contains a characteristic t(12;16) chromosomal translocation that results in fusion of the N-terminal domain of the translocated in liposarcoma (TLS) protein to the C/EBP homologous protein (CHOP). TLS possesses structural motifs that suggest it may participate in RNA processing. We demonstrate that in human myxoid liposarcoma cells, wild-type TLS binds to RNA polymerase II (Pol II) via its N-terminal domain and to the transcription and translation factor Y-box binding protein-1 (YB-1) through its C-terminal domain. The liposarcoma fusion protein TLS/CHOP retains the ability to bind RNA Pol II but lacks the ability to recruit YB-1 due to replacement of the C-terminal domain of TLS by CHOP. In an in vivo splicing assay, YB-1 promotes splicing of adenovirus EIA pre-mRNA predominantly to the 13S isoform. The oncogenic TLS/CHOP fusion protein inhibits this splicing function of YB-1 in a dominant negative manner. When considered in conjunction with studies on other sarcoma fusion proteins, these data suggest that aberrant RNA splicing may be a common feature of human sarcomas.