Epigenetic silencing of secreted wingless-type (Wnt) antagonists through hypermethylation is associated with tobacco smoking and with invasive bladder cancer. The secreted Wnt inhibitory factor-1 (WIF1) has shown consistent growth-inhibitory effect on various cancer cell lines. Therefore, we assessed the mechanisms of action of WIF1 by either restoring WIF1 expression in invasive bladder cancer cell lines (T24 and TSU-PR1) or using a recombinant protein containing functional WIF1 domain. Both ectopic expression of WIF1 and treatment with WIF1 domain protein resulted in cell growth inhibition via G(1) arrest. The G(1) arrest induced by WIF1 is associated with down-regulation of SKP2 and c-myc and up-regulation of p21/WAF1 and p27/Kip1. Conversely, reexpression of SKP2 in WIF1-overexpressing TSU-PR1 cells attenuated the WIF1-induced G(1) arrest. Furthermore, inhibition of nuclear Wnt signaling by either dominant-negative LEF1 or short hairpin RNA of TCF4 also reduced SKP2 expression. The human SKP2 gene contains two TCF/LEF1 consensus binding sites within the promoter. Chromatin immunoprecipitation/real-time PCR analysis revealed that both WIF1 and dominant-negative LEF1 expression decreased the in vivo binding of TCF4 and beta-catenin to the SKP2 promoter. Together, our results suggest that mechanisms of WIF1-induced G(1) arrest include (a) SKP2 down-regulation leading to p27/Kip1 accumulation and (b) c-myc down-regulation releasing p21/WAF1 transcription. Additionally, we show that WIF1 inhibits in vivo bladder tumor growth in nude mice. These observations suggest a mechanism for transformation of bladder epithelium on loss of WIF1 function and provide new targets such as SKP2 for intervention in WIF1-deficient bladder cancer.