MOTIVATION: Fusion transcripts can be created as a result of genome rearrangement in cancer. Some of them play important roles in carcinogenesis, and can serve as diagnostic and therapeutic targets. With more and more cancer genomes being sequenced by next-generation sequencing technologies, we believe an efficient tool for reliably identifying fusion transcripts will be desirable for many groups. RESULTS: We designed and implemented an open-source software tool, called FusionHunter, which reliably identifies fusion transcripts from transcriptional analysis of paired-end RNA-seq. We show that FusionHunter can accurately detect fusions that were previously confirmed by RT-PCR in a publicly available dataset. The purpose of FusionHunter is to identify potential fusions with high sensitivity and specificity and to guide further functional validation in the laboratory. AVAILABILITY: http://bioen-compbio.bioen.illinois.edu/FusionHunter/.