Neuroblastoma is a pediatric tumor that originates from precursor cells of the sympathetic nervous system with less than 40% long-term survival in children diagnosed with high-risk disease. These clinical observations underscore the need for novel insights in the mechanisms of malignant transformation and progression. Accordingly, it was recently reported that Prox1, a homeobox transcription regulator, is expressed in higher levels in human neuroblastoma with favorable prognosis. Consistently, we have recently shown that Prox1 exerts a strong antiproliferative effect on neural precursor cells during embryonic development. Thus, Prox1 is a candidate gene with a critical role in suppressing malignant neuroblastoma transformation. Here, we provide evidence that Prox1 strongly suppresses the proliferation of mouse and human neuroblastoma cell lines and blocks the growth of neuroblastoma tumors in SCID mice. Conversely, short hairpin RNA (shRNA) -mediated knockdown of basal Prox1 expression significantly induces proliferation, genomic instability and the ability of neuroblastoma cells to form tumors. Mechanistically, analysis of an inducible Prox1-overexpressing Neuro2A cell line indicates that Prox1 is sufficient to suppress CyclinD1, CyclinA and CyclinB1, consistent with a role in cell cycle arrest. Surprisingly, Prox1 strongly induces CyclinE1 expression in the same system despite its action on blocking cell cycle progression, which could account for the context dependent oncogenic function of Prox1. Most importantly, Prox1 was sufficient to decrease Cdc25A and induce p27-Kip1, but not p21-Cip1 or p53. By alleviating the Prox1 action in Cdc25A and p27-Kip1 expression, we were able to rescue its effect on cell cycle arrest. Together these data suggest that Prox1 negatively regulates neuroblastoma carcinogenesis through suppression of Cdc25A and induction of p27-Kip1 to counteract CyclinE1 overexpression and block cell cycle progression. Furthermore, these observations render Prox1 a candidate target for the treatment of neuroblastoma tumors.