Alveolar rhabdomyosarcoma (RMS) is an aggressive pediatric cancer of the myogenic lineage with frequent chromosomal translocations involving the PAX3 or PAX7 and FOXO1 genes. Based on previous studies indicating that the fusion genes are amplified in a subset of these cancers, we conducted a comprehensive molecular and clinical investigation of these amplification events. Using oligonucleotide arrays to localize amplicons, we found that the minimal 1p36 amplicon measured 0.13 Mb and only contained PAX7 whereas the minimal 13q14 amplicon measured 0.53 Mb and contained FOXO1 and the poorly characterized LOC646982 gene. Application of a fluorescence in situ hybridization assay to over 100 fusion‐positive cases revealed that the fusion gene is amplified in 93% of PAX7‐FOXO1‐positive and 9% of PAX3‐FOXO1‐positive cases. While most cells in amplified PAX7‐FOXO1‐positive cases contained the amplicon, only a fraction of cells in the amplified PAX3‐FOXO1‐positive cases contained the amplicon. Expression studies demonstrated that the fusion transcripts were generally expressed at higher levels in amplified cases, and that the PAX7‐FOXO1 fusion transcript was expressed at higher levels than the PAX3‐FOXO1 fusion transcript. Finally, fusion gene amplification and PAX7‐FOXO1 fusion status were each associated with significantly improved outcome; a multivariate analysis demonstrated that this predictive value was independent of other standard prognostic parameters. These findings therefore provide further evidence for a novel good prognosis subset of fusion‐positive RMS. © 2012 Wiley Periodicals, Inc.