The study of epithelial differentiation touches upon many modern aspects of biology. The epithelium is in constant dialogue with the underlying mesenchyme to control stem cell activity, proliferation in transit-amplifying compartments, lineage commitment, terminal differentiation and, ultimately, cell death. There are spatially distinct compartments dedicated to each of these events. Recently we reported that heparanase is expressed in nucleus as well as in the cytoplasm and that nuclear heparanase seems to be related to cell differentiation. In this study, we investigated the role of nuclear heparanase in differentiation by transducing human mammary epithelial cancer cells with heparanase which was delivered specifically into nucleus. We observed that expression of nuclear heparanase allowed the cells to differentiate with the appearance of lipid droplets. This finding supports the idea that heparanase plays a novel role in epithelial cell differentiation apart from its known enzymatic function. © 2005 Elsevier Inc. All rights reserved.