The oncogenic fusion gene EWS-WT1 is the defining chromosomal translocation in desmoplastic small round-cell tumors (DSRCT), a rare but aggressive soft tissue sarcoma with a high rate of mortality. EWS-WT1 functions as an aberrant transcription factor that drives tumorigenesis, but the mechanistic basis for its pathogenic activity is not well understood. To address this question, we created a transgenic mouse strain that permits physiologic expression of EWS-WT1 under the native murine Ews promoter. EWS-WT1 expression led to a dramatic induction of many neuronal genes in embryonic fibroblasts and primary DSRCT, most notably the neural reprogramming factor ASCL1. Mechanistic analyses demonstrated that EWS-WT1 directly bound the proximal promoter of ASCL1, activating its transcription through multiple WT1-responsive elements. Conversely, EWS-WT1 silencing in DSRCT cells reduced ASCL1 expression and cell viability. Notably, exposure of DSRCT cells to neuronal induction media increased neural gene expression and induced neurite-like projections, both of which were abrogated by silencing EWS-WT1. Taken together, our findings reveal that EWS-WT1 can activate neural gene expression and direct partial neural differentiation via ASCL1, suggesting agents that promote neural differentiation might offer a novel therapeutic approach to treat DSRCT.