Pax genes consist of a family of transcription factors that are essentially required for the genesis of a variety of tissues and organs. Pax3 and Pax7 are specifically expressed in the dorsal neural tube and the developing somite. Loss-of-function mutations of Pax3 in Splotch mice and in Waardenburg syndrome in man revealed that Pax3 is necessary for the proper formation of caudal neural crest derivatives and for the migration of myoblasts into the limb. Mice with a mutated Pax7 gene suffer from defects in cephalic neural crest derivatives only and indicate that both genes may functionally share some redundancy. Gain-of-function mutations creating fusion proteins consisting of PAX3 or PAX7 and another transcription factor of the forkhead family (FKHR) are associated with alveolar rhabdomyosarcomas. The analyses of Pax3 and Pax7 function in normal development indicate that Pax3 (possibly also Pax7) triggers neoplastic development by maintaining cells in a deregulated undifferentiated and proliferative state in alveolar rhabdomyosarcomas.