Bladder cancer has a high recurrence rate and low survival of advanced stage patients. Few genetic drivers of bladder cancer have thus far been identified. We performed in-depth structural variant analysis on whole-genome sequencing data of 206 metastasized urinary tract cancers. In ~ 10% of the patients, we identified recurrent in-frame deletions of exons 8 and 9 in the aryl hydrocarbon receptor gene (AHRΔe8-9), which codes for a ligand-activated transcription factor. Pan-cancer analyses show that AHRΔe8-9 is highly specific to urinary tract cancer and mutually exclusive with other bladder cancer drivers. The ligand-binding domain of the AHRΔe8-9 protein is disrupted and we show that this results in ligand-independent AHR-pathway activation. In bladder organoids, AHRΔe8-9 induces a transformed phenotype that is characterized by upregulation of AHR target genes, downregulation of differentiation markers and upregulation of genes associated with stemness and urothelial cancer. Furthermore, AHRΔe8-9 expression results in anchorage independent growth of bladder organoids, indicating tumorigenic potential. DNA-binding deficient AHRΔe8-9 fails to induce transformation, suggesting a role for AHR target genes in the acquisition of the oncogenic phenotype. In conclusion, we show that AHRΔe8-9 is a novel driver of urinary tract cancer and that the AHR pathway could be an interesting therapeutic target.