AbstractPTEN promoter hypermethylation is nearly universal and PTEN copy number loss occurs in ~25% of fusion-negative rhabdomyosarcoma (FN-RMS). Here we show Pten deletion in a mouse model of FN-RMS results in less differentiated tumors more closely resembling human embryonal RMS. PTEN loss activated the PI3K pathway but did not increase mTOR activity. In wild-type tumors, PTEN was expressed in the nucleus suggesting loss of nuclear PTEN functions could account for these phenotypes. Pten deleted tumors had increased expression of transcription factors important in neural and skeletal muscle development including Dbx1 and Pax7. Pax7 deletion completely rescued the effects of Pten loss. Strikingly, these Pten;Pax7 deleted tumors were no longer FN-RMS but displayed smooth muscle differentiation similar to leiomyosarcoma. These data highlight how Pten loss in FN-RMS is connected to a PAX7 lineage-specific transcriptional output that creates a dependency or synthetic essentiality on the transcription factor PAX7 to maintain tumor identity.