PAX3-FKHR, the product of a rearrangement of PAX3 with FKHR is the pathogenetic marker for alveolar rhabdomyosarcoma, an aggressive form of childhood cancer. In this work we show that PAX3-FKHR, which is a stronger transcriptional activator relative to PAX3, can lead to two apparently irreconcilable outcomes: transformation and terminal myogenic differentiation. Fibroblasts (10T1/2, NIH3T3, and a newly established murine line named 'Plus') transduced by PAX3-FKHR acquire transformed features such as anchorage independence and loss of contact inhibition and concomitantly undergo various degrees of myogenic conversion depending on the host cells, including, in the case of the Plus line, terminal differentiation into contractile myotubes. This work highlights the potential of PAX3-FKHR to functionally operate as a deregulated Pangene and may have implications with regard to the identity of the precursor cell giving rise to alveolar rhabdomyosarcoma.