While the pro-tumorigenic function of heparanase is well taken, the role of its close homolog, heparanase 2 (Hpa2) in cancer is by far less investigated. Utilizing immunohistochemical analysis we found that Hpa2 is expressed by normal bladder transitional epithelium and its levels are decreased substantially in bladder cancer. Notably, tumors that retain high levels of Hpa2 were diagnosed as low grade (p=0.001) and low stage (p=0.002), suggesting that Hpa2 is required to preserve cell differentiation and halt cell motility. Indeed, migration of 5637 bladder carcinoma cells was attenuated significantly by exogenous addition of purified Hpa2, and over expression of Hpa2 in 5637 cells resulted in smaller tumors that were diagnosed as low grade. We also noted that tumors produced by Hpa2 over expressing cells are abundantly decorated with stromal cells and collagen deposition evident by Masson's/Trichrome staining, correlating with a marked increase in lysyl oxidase (LOX) staining. The association between Hpa2 and LOX was further confirmed clinically, because of the 16 cases that exhibited strong staining of Hpa2, 14 (87.5%) were also stained strongly for LOX (p=0.05). Collectively, our results suggest that Hpa2 functions as a tumor suppressor in bladder cancer, maintaining cellular differentiation and decreasing cell motility in a manner that appears to be independent of regulating heparanase activity.