Chromosomal rearrangements of the RET proto-oncogene (RET/PTC) are the common feature of papillary thyroid carcinoma (PTC). In this study, we report the identification, cloning, and functional characterization of a novel type of RET/PTC rearrangement that results from the fusion of the 3'-portion of RET coding for the tyrosine kinase (TK) domain of the receptor to the 5'-portion of the Homo sapiens hook homolog 3 (HOOK3) gene. The novel fusion was identified in a case of PTC that revealed a gene expression signature characteristic of RET/PTC on DNA microarray analysis, but was negative for the most common types of RET rearrangement. A fusion product between exon 11 of HOOK3 and exon 12 of RET gene was identified by 5'RACE, and the presence of chimeric HOOK3-RET protein of 88 kDa was detected by western blot analysis with an anti-RET antibody. The protein is predicted to contain a portion of the coiled-coil domains of HOOK3 and the intact TK domain of RET. Expression of the HOOK3-RET cDNA in NIH3T3 cells resulted in the formation of transformed foci and in tumor formation after injection into nude mice, confirming the oncogenic nature of HOOK3-RET.