PTEN is a tumor suppressor gene mutated in many human cancers. We used the Cre-loxP system to generate an urothelium-specific null mutation of Pten in mice [FabpCrePten(flox/flox) (FPten(flox/flox)) mice]. Histologic examination revealed that all FPten(flox/flox) mice exhibited urothelial hyperplasia in which component cells showed enlarged nuclei and increased cell size. With time, 10% of FPten(flox/flox) mice spontaneously developed pedicellate papillary transitional cell carcinomas (TCC). This type of tumor also arose in FPten(flox/flox) mice treated with the chemical carcinogen N-butyl-N-(4-hydroxybutyl) nitrosamine. FPten(flox/flox) urothelial cells were hyperproliferative and showed increased activation of the survival signaling molecules Akt and extracellular signal-regulated kinase. In humans, 53% of primary bladder cancer patients exhibited decreased or absent expression of PTEN protein in either the cytoplasm or nucleus of tumor cells. In early bladder cancers, PTEN expression was repressed in 42% of superficial papillary TCC but in only 8% of cases of carcinoma in situ (CIS). In advanced bladder cancers, PTEN protein was significantly reduced (particularly in the nucleus) in 94% of cases, and this decrease in PTEN correlated with disease stage and grade. Thus, PTEN deficiency may contribute to bladder cancer both by initiating superficial papillary TCC and by promoting the progression of CIS to advanced invasive and metastatic forms.