Expression of the SS18/SYT-SSX fusion protein is believed to underlie the pathogenesis of synovial sarcoma (SS). Recent evidence suggests that deregulation of the Wnt pathway may play an important role in SS but the mechanisms whereby SS18-SSX might affect Wnt signaling remain to be elucidated. Here, we show that SS18/SSX tightly regulates the elevated expression of the key Wnt target AXIN2 in primary SS. SS18-SSX is shown to interact with TCF/LEF, TLE and HDAC but not beta-catenin in vivo and to induce Wnt target gene expression by forming a complex containing promoter-bound TCF/LEF and HDAC but lacking beta-catenin. Our observations provide a tumor-specific mechanistic basis for Wnt target gene induction in SS that can occur in the absence of Wnt ligand stimulation.