Abstract Genome-wide association studies have identified 270 loci conferring risk for prostate cancer (PCa), yet the underlying biology and clinical impact remain to be investigated. Here we observe an enrichment of transcription factor genes including HNF1B within PCa risk-associated regions. While focused on the 17q12/HNF1B locus, we find a strong eQTL for HNF1B and multiple potential causal variants involved in the regulation of HNF1B expression in PCa. An unbiased genome-wide co-expression analysis reveals PCa-specific somatic TMPRSS2-ERG fusion as a transcriptional mediator of this locus and the HNF1B eQTL signal is ERG fusion status dependent. We investigate the role of HNF1B and find its involvement in several pathways related to cell cycle progression and PCa severity. Furthermore, HNF1B interacts with TMPRSS2-ERG to co-occupy large proportion of genomic regions with a remarkable enrichment of additional PCa risk alleles. We finally show that HNF1B co-opts ERG fusion to mediate mechanistic and biological effects of the PCa risk-associated locus 17p13.3/VPS53/FAM57A/GEMIN4. Taken together, we report an extensive germline-somatic interaction between TMPRSS2-ERG fusion and genetic variations underpinning PCa risk association and progression.