Myxoid liposarcoma is caused by a chromosomal translocation resulting in a fusion protein comprised of the N terminus of FUS (fused in sarcoma) and the full-length transcription factor CHOP (CCAAT/enhancer-binding protein homologous protein, also known as DDIT3). FUS functions in RNA metabolism, and CHOP is a stress-induced transcription factor. The FUS-CHOP fusion protein causes unique gene expression and oncogenic transformation. Although it is clear that the FUS segment is required for oncogenic transformation, the mechanism of FUS-CHOP-induced transcriptional activation is unknown. Recently, some transcription factors and super enhancers have been proposed to undergo liquid-liquid phase separation and form membraneless compartments that recruit transcription machinery to gene promoters. Since phase separation of FUS depends on its N terminus, transcriptional activation by FUS-CHOP could result from the N terminus driving nuclear phase transitions. Here, we characterized FUS-CHOP in cells and in vitro, and observed novel phase-separating properties relative to unmodified CHOP. Our data indicate that FUS-CHOP forms phase-separated condensates that colocalize with BRD4, a marker of super enhancer condensates. We provide evidence that the FUS-CHOP phase transition is a novel oncogenic mechanism and potential therapeutic target for myxoid liposarcoma. This article has an associated First Person interview with the first author of the paper.