Tumor development has long been known to resemble abnormal embryogenesis. The embryonic stem cell (ESC) self-renewal gene NANOG is purportedly expressed by some epithelial cancer cells but a causal role in tumor development has remained unclear. Here, we provide compelling evidence that cultured cancer cells, as well as xenograft- and human primary prostate cancer cells express a functional variant of NANOG. NANOG mRNA in cancer cells is derived predominantly from a retrogene locus termed NANOGP8. NANOG protein is detectable in the nucleus of cancer cells and is expressed higher in patient prostate tumors than matched benign tissues. NANOGP8 mRNA and/or NANOG protein levels are enriched in putative cancer stem/progenitor cell populations. Importantly, extensive loss-of-function analysis reveals that RNA interference-mediated NANOG knockdown inhibits tumor development, establishing a functional significance for NANOG expression in cancer cells. Nanog short hairpin RNA transduced cancer cells exhibit decreased long-term clonal and clonogenic growth, reduced proliferation and, in some cases, altered differentiation. Thus, our results demonstrate that NANOG, a cell-fate regulatory molecule known to be important for ESC self-renewal, also plays a novel role in tumor development.