Rhabdomyosarcoma (RMS) is the commonest soft-tissue sarcoma in childhood and is characterized by expression of myogenic proteins, including the transcription factors MyoD and myogenin. There are two main subgroups, embryonal RMS and alveolar RMS (ARMS). Most ARMS are associated with chromosomal translocations that have breakpoints in introns of either PAX3 or PAX7, and FOXO1A. These translocations create chimeric transcription factors termed PAX3/FOXO1A and PAX7/FOXO1A respectively. Upon ectopic PAX3/FOXO1A expression, together with other genetic manipulation in mice, both differentiating myoblasts and satellite cells (the resident stem cells of postnatal muscle) can give rise to tumours with ARMS characteristics. As PAX3 and PAX7 are part of transcriptional networks that regulate muscle stem cell function in utero and during early postnatal life, PAX3/FOXO1A and PAX7/FOXO1A may subvert normal PAX3 and PAX7 functions. Here we examined how PAX3/FOXO1A and PAX7/FOXO1A affect myogenesis in satellite cells. PAX3/FOXO1A or PAX7/FOXO1A inhibited myogenin expression and prevented terminal differentiation in murine satellite cells: the same effect as dominant-negative (DN) Pax3 or Pax7 constructs. The transcription of MyoD-target genes myogenin and muscle creatine kinase were suppressed by PAX3/FOXO1A or PAX7/FOXO1A in C2C12 myogenic cells again as seen with Pax3/7DN. PAX3/FOXO1A or PAX7/FOXO1A did not inhibit the transcriptional activity of MyoD by perturbing MyoD expression, localization, phosphorylation or interaction with E-proteins. Chromatin immunoprecipitation on the myogenin promoter showed that PAX3/FOXO1A or PAX7/FOXO1A did not prevent MyoD from binding. However, PAX3/FOXO1A or PAX7/FOXO1A reduced occupation of the myogenin promoter by RNA polymerase II and decreased acetylation of histone H4, but did not directly bind to the myogenin promoter. Together, these observations reveal that PAX3/FOXO1A and PAX7/FOXO1A act to prevent myogenic differentiation via suppression of the transcriptional activation of MyoD-target genes.