Osteomodulin (OMD) and proline/arginine-rich end leucine repeat protein (PRELP) are secreted extracellular matrix proteins belonging to the small leucine-rich proteoglycans family. We found that OMD and PRELP were specifically expressed in umbrella cells in bladder epithelia, and their expression levels were dramatically downregulated in all bladder cancers from very early stages and various epithelial cancers. Our in vitro studies including gene expression profiling using bladder cancer cell lines revealed that OMD or PRELP application suppressed the cancer progression by inhibiting TGF-β and EGF pathways, which reversed epithelial-mesenchymal transition (EMT), activated cell-cell adhesion, and inhibited various oncogenic pathways. Furthermore, the overexpression of OMD in bladder cancer cells strongly inhibited the anchorage-independent growth and tumorigenicity in mouse xenograft studies. On the other hand, we found that in the bladder epithelia, the knockout mice of OMD and/or PRELP gene caused partial EMT and a loss of tight junctions of the umbrella cells and resulted in formation of a bladder carcinoma in situ-like structure by spontaneous breakdowns of the umbrella cell layer. Furthermore, the ontological analysis of the expression profiling of an OMD knockout mouse bladder demonstrated very high similarity with those obtained from human bladder cancers. Our data indicate that OMD and PRELP are endogenous inhibitors of cancer initiation and progression by controlling EMT. OMD and/or PRELP may have potential for the treatment of bladder cancer.