Malignant peripheral nerve sheath tumor (MPNST), an aggressive soft-tissue sarcoma, occurs in people with neurofibromatosis type 1 (NF1) and sporadically. Whole-genome and multiregional exome sequencing, transcriptomic, and methylation profiling of 95 tumor samples revealed the order of genomic events in tumor evolution. Following biallelic inactivation of NF1, loss of CDKN2A or TP53 with or without inactivation of polycomb repressive complex 2 (PRC2) leads to extensive somatic copy-number aberrations (SCNA). Distinct pathways of tumor evolution are associated with inactivation of PRC2 genes and H3K27 trimethylation (H3K27me3) status. Tumors with H3K27me3 loss evolve through extensive chromosomal losses followed by whole-genome doubling and chromosome 8 amplification, and show lower levels of immune cell infiltration. Retention of H3K27me3 leads to extensive genomic instability, but an immune cell-rich phenotype. Specific SCNAs detected in both tumor samples and cell-free DNA (cfDNA) act as a surrogate for H3K27me3 loss and immune infiltration, and predict prognosis. SIGNIFICANCE: MPNST is the most common cause of death and morbidity for individuals with NF1, a relatively common tumor predisposition syndrome. Our results suggest that somatic copy-number and methylation profiling of tumor or cfDNA could serve as a biomarker for early diagnosis and to stratify patients into prognostic and treatment-related subgroups. This article is highlighted in the In This Issue feature, p. 517.