STAG2, a cohesin family gene, is among the most recurrently mutated genes in cancer. STAG2 loss of function (LOF) is associated with aggressive behavior in Ewing sarcoma, a childhood cancer driven by aberrant transcription induced by the EWSR1-FLI1 fusion oncogene. Here, using isogenic Ewing cells, we show that, while STAG2 LOF profoundly changes the transcriptome, it does not significantly impact EWSR1-FLI1, CTCF/cohesin, or acetylated H3K27 DNA binding patterns. In contrast, it strongly alters the anchored dynamic loop extrusion process at boundary CTCF sites and dramatically decreases promoter-enhancer interactions, particularly affecting the expression of genes regulated by EWSR1-FLI1 at GGAA microsatellite neo-enhancers. Down-modulation of cis-mediated EWSR1-FLI1 activity, observed in STAG2-LOF conditions, is associated with enhanced migration and invasion properties of Ewing cells previously observed in EWSR1-FLI1low cells. Our study illuminates a process whereby STAG2-LOF fine-tunes the activity of an oncogenic transcription factor through altered CTCF-anchored loop extrusion and cis-mediated enhancer mechanisms.