We report here that the Id2 (inhibitor of DNA binding 2) gene is a novel target of transcriptional activation by EWS–FLI1 and EWS–ERG, two fusion proteins that characterize Ewing family tumors (EFTs). To identify downstream targets of these EWS–ETS fusion proteins, we introduced EWS–ETS fusion constructs into a human fibrosarcoma cell line by retroviral transduction. cDNA microarray analysis revealed that Id2 expression was up-regulated by introducing the EWS–ETS fusion gene but not by the normal full-length ETS gene. An Id2 promoter-luciferase reporter assay showed that transactivation by EWS–ETS involves the minimal Id2 promoter and may function in cooperation with c-Myc within the full-length regulatory region. A chromatin immunoprecipitation assay revealed direct interaction between the Id2 promoter and EWS-FLI1 fusion protein in vivo. Significantly higher expression of Id2 and c-Myc was observed in all of the six EFT cell lines examined compared to six other sarcoma cell lines. Moreover, high levels of Id2 expression were also observed in five of the six primary tumors examined. Id2 is generally thought to affect the balance between cell differentiation and proliferation in development and is highly expressed in several cancer types. Considering these previous studies, our data suggest that the oncogenic effect of EWS–ETS may be mediated in part by up-regulating Id2 expression.