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The EWS/FLI-1 fusion gene results from the 11;22 chromosomal translocation in Ewing's sarcoma. The product of the gene is one of a growing number of structurally altered transcription factors implicated in oncogenesis. We have employed a subtractive cloning strategy of representational difference analysis in conjunction with a model transformation system to identify genes transcribed in response to EWS/FLI. We have characterized eight transcripts that are dependent on EWS/FLI for expression and two transcripts that are repressed in response to EWS/FLI. Three of the former were identified by sequence analysis as stromelysin 1, a murine homolog of cytochrome P-450 F1 and cytokeratin 15. Stromelysin 1 is induced rapidly after expression of EWS/FLI, suggesting that the stromelysin 1 gene may be a direct target gene of EWS/FLI. These results demonstrate that expression of EWS/FLI leads to significant changes in the transcription of specific genes and that these effects are at least partially distinct from those caused by expression of germ line FLI-1. The representational difference analysis technique can potentially be applied to investigate transformation pathways activated by a broad array of genes in different tumor systems.