Rhabdomyosarcoma (RMS) is the most common pediatric soft tissue sarcoma. In children, the 2 major RMS subtypes are alveolar and embryonal RMS. Aberrant Hedgehog/Patched1 (Hh/Ptch) signaling is a hallmark of embryonal RMS. We demonstrate that mice carrying a Ptch mutation in mesodermal Delta1-expressing cells develop embryonal-like RMS at a similar rate as mice harboring a Ptch mutation in the germline or the brachury-expressing mesoderm. The tumor incidence decreases dramatically when Ptch is mutated in Myf5- or Pax3-expressing cells. No RMS develop from Myogenin/Mef2c-expressing cells. This suggests that Hh/Ptch-associated RMS are derived from Delta1-positive, Myf5-negative, Myogenin-negative and Pax3-negative mesodermal progenitors that can undergo myogenic differentiation but lack stable lineage commitment. Additional preliminary genetic data and data on mesodermal progenitors further imply an interplay of Hh/Ptch and Delta/Notch signaling activity during RMS initiation. In contrast, Wnt signals supposedly suppress RMS formation because RMS multiplicity decreases after inactivation of the Wnt-inhibitor Wif1. Finally, our results strongly suggest that the tumor-initiating event determines the lineage of RMS origin.