PAX transcription factors are key players in the development of different tissues and organs. At the cellular level they are involved in regulating lineage commitment and differentiation. Interference with these tightly regulated functions of PAX proteins is associated with developmental abnormalities and tumorigenesis of several types of cancer. As a result of aberrant PAX protein activity, either by gain- or loss of function mechanisms, affected cells are kept in a proliferative state by blocking their terminal differentiation. PAX proteins with a gain-of-function role in cancer are active in the proliferative state of cells and have to be downregulated before they can complete the differentiation process. Such PAX proteins are usually activated in malignancies by chromosomal translocations generating fusions with strong transcriptional activators. PAX proteins with tumor suppressor activity are actively driving the differentiation process and are necessary for the exit from the proliferative state. In cancer, a diverse set of mutational mechanisms is involved in reducing their activity. Here, we discuss the characteristics of mutant PAX proteins in different types of cancer including alveolar rhabdomyosarcoma, biphenotypic sinonasal sarcoma, thyroid cancer and leukemia, with special focus on their role in interference with normal differentiation pathways of the cell lineage involved.