Translocation t(11;22) is a karyotypic abnormality detected in over 90% of Ewing's family tumors. This translocation results in the EWS-Fli1 fusion gene, which has been shown to be a potent, single-step transforming gene. We reported previously that suppression of the EWS-Fli1 fusion protein altered the expression of G(1) regulatory cyclins and cyclin-dependent kinase inhibitors both at mRNA and protein levels, resulting in G(1) growth arrest in Ewing's family tumor cell lines. These data suggest that the G(1) regulatory molecules may be targets of the EWS-Fli1 fusion protein, which functions as an aberrant transcription factor. By using electrophoretic mobility shift assays, we show here the direct association of EWS-Fli1 fusion protein with ETS consensus sequences, which are in the promoter of the p21(WAF1/CIP1) gene. Reporter gene assays revealed that the activity of the p21(WAF1/CIP1) promoter is negatively regulated by EWS-Fli1 fusion protein through at least two ETS-binding sites in the promoter. EWS-Fli1 interacted with p300 cotransactivator and suppressed its histone acetyltransferase activity, which may explain the down-regulation of p21(WAF1/CIP1) by EWS-Fli1. In the presence of a histone deacetylase inhibitor, the histone acetyltransferase activity of the Ewing's family tumor cell was recovered resulting in the induction of p21, and the cell growth was dramatically inhibited. These results demonstrated that p21(WAF1/CIP1) might be one of the direct targets of EWS-Fli1, and that p21(WAF1/CIP1) could serve as a target for a molecularly based therapy for Ewing's family tumors.