Alveolar rhabdomyosarcoma (ARMS) is an aggressive childhood muscle sarcoma with a 5-year survival rate of less than 30%. More than 80% of ARMSs harbor a PAX3-FOXO1 fusion transcription factor. However, expression of PAX3-FOXO1 in muscle cells alone is not sufficient and requires the loss of function of Ink4a/ARF to promote malignant proliferation of muscle cells in vitro or initiate ARMS tumor formation in vivo. This prompted us to examine the signaling pathways required to activate the function of PAX3-FOXO1 and to explore the functional interaction between the Ink4a/ARF and PAX3-FOXO1 signaling pathways. Here we report that inhibition of cyclin-dependent kinase 4 (Cdk4) by fascaplysin (a small molecule selective inhibitor of Cdk4/cyclin D1 that we identified in a screen for compounds that inhibit PAX3-FOXO1) led to inhibition of the transcriptional activity of PAX3-FOXO1 in ARMS cell line Rh30. Consistent with this finding, activation of Cdk4 enhanced the activity of PAX3-FOXO1. In vitro kinase assays revealed that Cdk4 directly phosphorylated PAX3-FOXO1 at Ser(430). Whereas fascaplysin did not affect the protein level of PAX3-FOXO1, it did increase the cytoplasmic level of PAX3-FOXO1 in a portion of cells. Our findings indicate that Cdk4 phosphorylates and positively regulates PAX3-FOXO1 and suggest that inhibition of Cdk4 activity should be explored as a promising avenue for developing therapy for ARMS.