Heparanase has been implicated in cancer but its contribution to the early stages of cancer development is uncertain. In this study, we utilized non-transformed human MCF10A mammary epithelial cells and two genetic mouse models (Hpa-transgenic and knockout mice) to explore heparanase function at early stages of tumor development. Heparanase overexpression resulted in significantly enlarged asymmetrical acinar structures, indicating increased cell proliferation and decreased organization. This phenotype was enhanced by co-expression of heparanase variants with a mutant H-Ras gene, which was sufficient to enable growth of invasive carcinoma in vivo. These observations were extended in vivo by comparing the response of Hpa-transgenic (Hpa-Tg) mice to a classical two-stage DMBA/TPA protocol for skin carcinogenesis. Hpa-Tg mice overexpressing heparanase were far more sensitive than control mice to DMBA/TPA treatment, exhibiting a 10-fold increase in the number and size of tumor lesions. Conversely, DMBA/TPA-induced tumor formation was greatly attenuated in Hpa-KO mice lacking heparanase, pointing to a critical role of heparanase in skin tumorigenesis. In support of these observations, the heparanase inhibitor PG545 potently suppressed tumor progression in this model system. Taken together, our findings establish that heparanase exerts pro-tumorigenic properties at early stages of tumor initiation, co-operating with Ras to dramatically promote malignant development.