The (2;5)(p23;q35) lymphoma-associated chromosomal translocation creates a novel fusion gene that incorporates parts of the anaplastic lymphoma kinase (ALK) receptor tyrosine kinase and nucleophosmin genes. We report here that the product of this fusion gene accumulates within the nucleoli of neoplastic cells, and that previous reports of a predominantly cytoplasmic localization for the protein represent a tissue-processing artifact. However, nucleolar accumulation of nucleophosmin-ALK may not be necessary for its oncogenic action, because an ALK protein expressed in a lymphoma carrying a variant (1;2) chromosomal translocation did not accumulate in nucleoli. Furthermore, an engineered hybrid TPR-ALK protein can transform rodent fibroblasts and produce lymphomas in mice while remaining confined to the cytoplasm. We propose that the transforming action of ALK may not be reliant on its nucleolar localization, a hypothesis that may have implications for studies of other proteins involved in oncogenesis that are relocalized after the creation of fusion genes.