Multiple lines of evidence have provided compelling evidence for the existence of a tumor suppressor gene (TSG) on chromosome 7q31.1. ST7 may be the target of this genetic instability but its designation as a TSG is controversial. In this study, we show that, functionally, ST7 behaves as a tumor suppressor in human cancer. ST7 suppressed growth of PC-3 prostate cancer cells inoculated subcutaneously into severe combined immunodeficient mice, and increased the latency of tumor detection from 13 days in control tumors to 23 days. Re-expression of ST7 was also associated with suppression of colony formation under anchorage-independent conditions in MDA-MB-231 breast cancer cells and ST7 mRNA expression was downregulated in 44% of primary breast cancers. Expression profiling of PC-3 cells revealed that ST7 predominantly induces changes in genes involved in re-modeling the extracellular matrix such as SPARC, IGFBP5 and several matrix metalloproteinases. These data indicate that ST7 may mediate tumor suppression through modification of the tumor microenvironment.