Cadherins are transmembrane glycoproteins that mediate Ca(2+)-dependent homophilic cell-cell adhesion and play a crucial role in proliferation, differentiation, and cell transformation. The goal of this study was to understand why R-cadherin is found in rhabdomyosarcomas (RMS), tumors of skeletal muscle origin, whereas it is absent in normal myoblasts. We show that R-cadherin expression in C2C12 myoblasts causes inhibition of myogenesis induction and impairment of cell cycle exit when cells are cultured in differentiation medium. Furthermore, R-cadherin expression elicits myoblast transformation, as shown by anchorage-independent growth in soft agar in vivo tumor formation assays and increased cell motility. In contrast, inhibition of R-cadherin expression using RNA interference hinders growth of RD cell line in soft agar and its tumorigenicity in mice. The analysis of the nature of R-cadherin-mediated signals shows that R-cadherin-dependent adhesion increases Rac1 activity. Dominant-negative forms of Rac1 inhibit R-cadherin-mediated signaling and transformation. In addition, expression of R-cadherin results in perturbed function of endogenous N-cadherin and M-cadherin. Together, these data suggest that R-cadherin expression inhibits myogenesis and induces myoblast transformation through Rac1 activation. Therefore, the properties of R-cadherin make it an attractive target for therapeutic intervention in RMS.