Fusion of the 5' half of the Ewing's sarcoma (ES) gene EWS with the DNA-binding domain of several transcription factors has been detected in many human tumors. The t(11;22)(q24;q12) chromosomal translocation is specifically linked to ES and primitive neuroectodermal tumors and results, in the majority of cases, in the fusion of the amino terminus of the EWS gene to the carboxyl-terminal DNA-binding domain of the FLI1 gene. The chimeric protein has been shown to be oncogenic, a potent transcriptional activator, and necessary for the maintenance of the Ewing's phenotype, making it an attractive target for gene therapy. In this study, we demonstrate that the ES transformed phenotype can be suppressed by chimeric transcriptional repressors containing the DNA-binding domain of FLI1 and the regulatory and repressor domain of ERF, a transcription suppressor and member of the ets gene family. The hybrid repressor is expressed at levels comparable with EWS/FLI1, does not affect EWS/FLI1 expression, and exhibits similar DNA-binding specificity but suppresses transcriptional activity. The FLI1/ERF repressor, like the wild-type ERF, is regulated by mitogen-activated protein kinase-dependent subcellular localization. Our data suggest that transformation by EWS/FLI1 may partially be due to activation of specific EWS/FLI1-regulated genes involved in cell proliferation.