Rhabdomyosarcoma (RMS) is the most frequent soft tissue sarcoma in children that shares many features of developing skeletal muscle. TBX2, a T-box family member, is highly upregulated in tumor cells of both major RMS subtypes where it functions as an oncogene. TBX2 is a repressor that is often overexpressed in cancer cells and functions in bypassing cell growth control, including the repression of the cell cycle regulators p14 and p21. We have found that TBX2 directly represses the tumor-suppressor phosphatase and tensin homolog (PTEN) in both RMS and normal muscle. Exogenous expression of TBX2 in normal muscle cells downregulates PTEN, and depletion or interference with TBX2 in RMS cells upregulates PTEN. Human RMS tumors show high levels of TBX2 and correspondingly low levels of PTEN. The expression of PTEN in clinical RMS samples is relatively uncharacterized, and we establish that suppression of PTEN is a frequent event in both subtypes of RMS. TBX2 represses PTEN by directly binding to the promoter and recruiting the histone deacetylase, HDAC1. RMS cells have high levels of activated AKT owing to the deregulation of phosphoinositide-3 kinase (PI3K) signaling, and depletion or interference with TBX2, which upregulates PTEN, results in a reduction of phospho-AKT. We have also found that the highly related T-box family member TBX3 does not repress PTEN in the muscle lineage. This work suggests that TBX2 is a central component of the PTEN/PI3K/AKT signaling pathway deregulation in RMS cells and that targeting TBX2 in RMS tumors may offer a novel therapeutic approach for RMS.