Hepatocyte growth factor (HGF) inhibits the proliferation of several tumor cell lines and tumor growth in vivo. We showed previously that HGF induces cell cycle arrest at G1 in a human hepatoma cell line, HepG2, by up-regulating the expression of p16INK4a through strong activation of extracellular signal-regulated kinase (ERK). However, although essential, the activation was not sufficient for the up-regulation of p16. In this study, we examined regulatory mechanisms of p16 expression through a transcription factor, Ets, which has been shown previously to bind to the promoter. The treatment of HepG2 cells with HGF induced ERK-dependent phosphorylation of Ets, which leads to its activation, before the up-regulation of p16, suggesting that another factor suppresses Ets activity. We found that HGF reduces the amount of Id1, which is a dominant-negative inhibitor of Ets, leading to a decrease in Ets associated with Id1. Id1 was down-regulated via transcriptional regulation not via the ubiquitin-proteasome-mediated pathway. Inhibition of the HGF-induced high-intensity ERK activity had a modest effect on the Id1 down-regulation, and inhibition of the phosphatidylinositol 3-kinase pathway had no effect, showing that Id1 is regulated by ERK-dependent and -independent pathways other than the phosphatidylinositol 3-kinase pathway. Exogenously expressed Id1 suppressed the up-regulation of p16 by HGF and the antiproliferative effect of HGF. Knockdown of Id1 significantly enhanced the activity of the p16 promoter coordinately with the activation of ERK. Our results indicated that down-regulation of Id1 plays a key role in the inhibitory effect of HGF on cell proliferation and provides a molecular basis for cancer therapy with HGF.