Key molecular drivers that underlie transformation of colonic epithelium into colorectal adenocarcinoma (CRC) are well described. However, the mechanisms through which clinically targeted pathways are activated during CRC progression have yet to be elucidated. Here, we used an integrative genomics approach to examine CRC progression. We used laser capture microdissection to isolate colonic crypt cells, differentiated surface epithelium, adenomas, carcinomas and metastases, and used gene expression profiling to identify pathways that were differentially expressed between the different cell types. We identified a number of potentially important transcriptional changes in developmental and oncogenic pathways, and noted a marked upregulation of EREG in primary and metastatic cancer cells. We confirmed this pattern of gene expression by in situ hybridization and observed staining consistent with autocrine expression in the tumor cells. Upregulation of EREG during the adenoma-carcinoma transition was associated with demethylation of two key sites within its promoter, and this was accompanied by an increase in the levels of epidermal growth factor receptor (EGFR) phosphorylation, as assessed by reverse-phase protein analysis. In CRC cell lines, we demonstrated that EREG demethylation led to its transcriptional upregulation, higher levels of EGFR phosphorylation, and sensitization to EGFR inhibitors. Low levels of EREG methylation in patients who received cetuximab as part of a phase II study were associated with high expression of the ligand and a favorable response to therapy. Conversely, high levels of promoter methylation and low levels of EREG expression were observed in tumors that progressed after treatment. We also noted an inverse correlation between EREG methylation and expression levels in several other cancers, including those of the head and neck, lung and bladder. Therefore, we propose that upregulation of EREG expression through promoter demethylation might be an important means of activating the EGFR pathway during the genesis of CRC and potentially other cancers.