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.