Many recurrent chromosome translocations in cancer result in the generation of fusion genes that are directly implicated in the tumorigenic process. Precise modeling of the effects of cancer fusion genes in mice has been inaccurate, as constructs of fusion genes often completely or partially lack the correct regulatory sequences. The reciprocal t(2;13)(q36.1;q14.1) in human alveolar rhabdomyosarcoma (A-RMS) creates a pathognomonic PAX3-FOXO1 fusion gene. In vivo mimicking of this translocation in mice is complicated by the fact that Pax3 and Foxo1 are in opposite orientation on their respective chromosomes, precluding formation of a functional Pax3-Foxo1 fusion via a simple translocation. To circumvent this problem, we irreversibly inverted the orientation of a 4.9 Mb syntenic fragment on chromosome 3, encompassing Foxo1, by using Cre-mediated recombination of two pairs of unrelated oppositely oriented LoxP sites situated at the borders of the syntenic region. We tested if spatial proximity of the Pax3 and Foxo1 loci in myoblasts of mice homozygous for the inversion facilitated Pax3-Foxo1 fusion gene formation upon induction of targeted CRISPR-Cas9 nuclease-induced DNA double strand breaks in Pax3 and Foxo1. Fluorescent in situ hybridization indicated that fore limb myoblasts show a higher frequency of Pax3/Foxo1 co-localization than hind limb myoblasts. Indeed, more fusion genes were generated in fore limb myoblasts via a reciprocal t(1;3), which expressed correctly spliced Pax3-Foxo1 mRNA encoding Pax3-Foxo1 fusion protein. We conclude that locus proximity facilitates chromosome translocation upon induction of DNA double strand breaks. Given that the Pax3-Foxo1 fusion gene will contain all the regulatory sequences necessary for precise regulation of its expression, we propose that CRISPR-Cas9 provides a novel means to faithfully model human diseases caused by chromosome translocation in mice.