Syndecan-1 is a transmembrane heparan sulfate proteoglycan which is indispensable in the structural and functional integrity of epithelia. Normal hepatocytes display strong cell surface expression of syndecan-1; however, upon malignant transformation, they may lose it from their cell surfaces. In this study, we demonstrate that re-expression of full-length or ectodomain-deleted syndecan-1 in hepatocellular carcinoma cells downregulates phosphorylation of ERK1/2 and p38, with the truncated form exerting an even stronger effect than the full-length protein. Furthermore, overexpression of syndecan-1 in hepatoma cells is associated with a shift of heparan sulfate structure toward a highly sulfated type specific for normal liver. As a result, cell proliferation and proteolytic shedding of syndecan-1 from the cell surface are restrained, which facilitates redifferentiation of hepatoma cells to a more hepatocyte-like phenotype. Our results highlight the importance of syndecan-1 in the formation and maintenance of differentiated epithelial characteristics in hepatocytes partly via the HGF/ERK/Ets-1 signal transduction pathway. Downregulation of Ets-1 expression alone, however, was not sufficient to replicate the phenotype of syndecan-1 overexpressing cells, indicating the need for additional molecular mechanisms. Accordingly, a reporter gene assay revealed the inhibition of Ets-1 as well as AP-1 transcription factor-induced promoter activation, presumably an effect of the heparan sulfate switch.