Adenomas are the precursors of most colorectal cancers. Hyperplastic polyps have been linked to the subset of colorectal cancers showing DNA microsatellite instability, but little is known of their underlying genetic etiology. Using a strategy that isolates differentially methylated sequences from hyperplastic polyps and normal mucosa, we identified a 370-bp sequence containing the 5' untranslated region and the first exon of a gene that we have called HPP1. Rapid amplification of cDNA ends was used to isolate HPP1 from normal mucosa. Using reverse transcription-PCR, HPP1 was expressed in 28 of 30 (93%) normal colonic samples but in only seven of 30 (23%) colorectal cancers (P < 0.001). The 5' region of HPP1 included a CpG island containing 49 CpG sites, of which 96% were found to be methylated by bisulfite sequencing of DNA from colonic tumor samples. By COBRA analysis, methylation was detected in six of nine (66%) adenomas, 17 of 27 (63%) hyperplastic polyps, and 46 of 55 (84%) colorectal cancers. There was an inverse relationship between methylation level and mRNA expression in cancers (r = -0.67; P < 0.001), and 5-aza-2-deoxycytidine treatment restored HPP1 expression in two colorectal cancer cell lines. In situ hybridization of HPP1 indicated that expression occurs in epithelial and stromal elements in normal mucosa but is silenced in both cell types in early colonic neoplasia. HPP1 is predicted to encode a transmembrane protein containing follistatin and epidermal growth factor-like domains. Silencing of HPP1 by methylation may increase the probability of neoplastic transformation.