Deregulated expression of ETS transcription factors has emerged as an important event in prostate cancer pathogenesis. Here we show that the expression of epithelial-specific ETS (ESE)-3 factor is frequently reduced at the RNA and protein level in prostate cancer clinical samples compared to normal prostate. In PC3 and DU145 cells, ESE-3 was silenced by methylation of an evolutionarily conserved CpG site in its promoter and treatment with 5-aza-2'-deoxycytidine restored its expression. In a prostate epithelial cell transformation model, methylation of this site was inversely correlated with ESE-3 expression and occurred only in Ras-transformed and tumorigenic cells and not in normal and immortalized cells suggesting that ESE-3 silencing was functionally linked to oncogenic transformation. Consistent with a tumor suppressor function, re-expression of ESE-3 in prostate cancer cells inhibited clonogenic survival and induced apoptotic cell death. ESE-3 increased the level of procaspase-3, a key element in the apoptotic cascade. This effect was mediated at the transcriptional level by direct binding of ESE-3 to the caspase-3 promoter. Collectively, our findings implicate ESE-3 as a candidate tumor suppressor in prostate cancer. Decreased expression of ESE-3 may result in loss of important regulatory mechanisms in prostate epithelial cells and contribute to the pathogenesis of prostate cancer.