The identification of subtype-specific translocations has revolutionized the diagnostics of sarcoma and has provided new insight into oncogenesis. We used RNA-seq to investigate samples from individuals diagnosed with small round cell tumors of bone, possibly Ewing sarcoma, but which lacked the canonical EWSR1-ETS translocation. A new fusion was observed between BCOR (encoding the BCL6 co-repressor) and CCNB3 (encoding the testis-specific cyclin B3) on the X chromosome. RNA-seq results were confirmed by RT-PCR and through cloning of the tumor-specific genomic translocation breakpoints. In total, 24 BCOR-CCNB3-positive tumors were identified among a series of 594 sarcoma cases. Gene profiling experiments indicated that BCOR-CCNB3-positive cases are biologically distinct from other sarcomas, particularly Ewing sarcoma. Finally, we show that CCNB3 immunohistochemistry is a powerful diagnostic marker for this subgroup of sarcoma and that overexpression of BCOR-CCNB3 or of truncated CCNB3 activates S phase in NIH3T3 cells. Thus, the intrachromosomal X-chromosome fusion described here represents a new subtype of bone sarcoma caused by a newly identified gene fusion mechanism.