The Drosophila transcription factor Prospero functions as a tumor suppressor, and it has been suggested that the human counterpart of Prospero, PROX1, acts similarly in human cancers. However, we show here that PROX1 promotes dysplasia in colonic adenomas and colorectal cancer progression. PROX1 expression marks the transition from benign colon adenoma to carcinoma in situ, and its loss inhibits growth of human colorectal tumor xenografts and intestinal adenomas in Apc^min/+ mice, while its transgenic overexpression promotes colorectal tumorigenesis. Furthermore, in intestinal tumors PROX1 is a direct and dose-dependent target of the β-catenin/TCF signaling pathway, responsible for the neoplastic transformation. Our data underscore the complexity of cancer pathogenesis and implicate PROX1 in malignant tumor progression through the regulation of cell polarity and adhesion.