Studies support the importance of microRNAs in physiological and pathological processes. Here we describe the regulation and function of miR-29 in myogenesis and rhabdomyosarcoma (RMS). Results demonstrate that in myoblasts, miR-29 is repressed by NF-kappaB acting through YY1 and the Polycomb group. During myogenesis, NF-kappaB and YY1 downregulation causes derepression of miR-29, which in turn accelerates differentiation by targeting its repressor YY1. However, in RMS cells and primary tumors that possess impaired differentiation, miR-29 is epigenetically silenced by an activated NF-kappaB-YY1 pathway. Reconstitution of miR-29 in RMS in mice inhibits tumor growth and stimulates differentiation, suggesting that miR-29 acts as a tumor suppressor through its promyogenic function. Together, these results identify a NF-kappaB-YY1-miR-29 regulatory circuit whose disruption may contribute to RMS.