Synovial sarcoma is a primitive mesenchymal neoplasm characterized in almost all cases by a t(X;18) fusing the SYT transcriptional coactivator gene with either SSX1 or SSX2, with the resulting fusion gene encoding an aberrant transcriptional regulator. A subset of synovial sarcoma, predominantly cases with the SYT-SSX1 fusion, shows foci of morphologic epithelial differentiation in the form of nests of glandular epithelium. The striking spontaneous mesenchymal to epithelial differentiation in this cancer is reminiscent of a developmental switch, but the only clue to its mechanistic basis has been the observation that most cases of synovial sarcoma with glandular epithelial differentiation (GED) contain SYT-SSX1 instead of SYT-SSX2. We report here that SYT-SSX1 and SYT-SSX2 interact preferentially with Snail or Slug, respectively, and prevent these transcriptional repressors from binding to the proximal E-cadherin promoter as shown by coimmunoprecipitation and chromatin immunoprecipitation. Luciferase reporter assays reveal that SYT-SSX1 and SYT-SSX2 can respectively overcome the Snail- or Slug-mediated repression of E-cadherin transcription. This provides a mechanism by which E-cadherin expression, a prerequisite of epithelial differentiation, is aberrantly derepressed in synovial sarcoma and may also explain the association of GED with the SYT-SSX1 fusion because it interferes with Snail, the stronger repressor of the E-cadherin promoter. Thus, our data provide a mechanistic basis for the observed heterogeneity in the acquisition of epithelial characteristics in synovial sarcoma and highlight the potential role of differential interactions with Snail or Slug in modulating this phenotypic transition.