Skeletal muscle differentiation and the activation of muscle-specific gene expression are dependent on the concerted action of the MyoD family and the MADS protein, MEF2, which function in a cooperative manner. The steroid receptor coactivator SRC-2/GRIP-1/TIF-2, is necessary for skeletal muscle differentiation, and functions as a cofactor for the transcription factor, MEF2. SRC-2 belongs to the SRC family of transcriptional coactivators/cofactors that also includes SRC-1 and SRC-3/RAC-3/ACTR/AIB-1. In this study we demonstrate that SRC-2 is essentially localized in the nucleus of proliferating myoblasts; however, weak (but notable) expression is observed in the cytoplasm. Differentiation induces a predominant localization of SRC-2 to the nucleus; furthermore, the nuclear staining is progressively more localized to dot-like structures or nuclear bodies. MEF2 is primarily expressed in the nucleus, although we observed a mosaic or variegated expression pattern in myoblasts; however, in myotubes all nuclei express MEF2. GRIP-1 and MEF2 are coexpressed in the nucleus during skeletal muscle differentiation, consistent with the direct interaction of these proteins. Rhabdomyosarcoma (RMS) cells derived from malignant skeletal muscle tumors have been proposed to be deficient in cofactors. Alveolar RMS cells very weakly express the steroid receptor coactivator, SRC-2, in a diffuse nucleocytoplasmic staining pattern. MEF2 and the cofactors, SRC-1 and SRC-3 are abundantly expressed in alveolar and embryonal RMS cells; however, the staining is not localized to the nucleus. Furthermore, the subcellular localization and transcriptional activity of MEF2C and a MEF2-dependent reporter are compromised in alveolar RMS cells. In contrast, embryonal RMS cells express SRC-2 in the nucleus, and MEF2 shuttles from the cytoplasm to the nucleus after serum withdrawal. In conclusion, this study suggests that the steroid receptor coactivator SRC-2 and MEF2 are localized to the nucleus during the differentiation process. In contrast, RMS cells display aberrant transcription factor SRC localization and expression, which may underlie certain features of the RMS phenotype.