Hepatocellular carcinoma (HCC) causes about 700,000 deaths each year, and its incidence in the US has tripled over the past 30 years. Available therapies are curative only in early-stage HCC. Better early-detection methods and treatments will require a greater understanding of the molecular mechanisms regulating the initiation and growth of HCC. We have identified a role for sulfatase 2 (SULF2), an extracellular endosulfatase, in HCC pathogenesis and are especially excited about the recent spontaneous development of liver cancers in our transgenic mice overexpressing SULF2 in the liver. Our previous work has shown that SULF2 releases heparin-binding growth factors from heparan sulfate glycosaminoglycan (HSGAG) storage sites in the extracellular compartment, increases growth factor signaling, and promotes HCC tumorigenesis. These results show that SULF2 exerts its effects in HCC in part through modulation of the Wnt signaling pathway. We have now identified the target molecule of this newly identified SULF2-Wnt signaling as the transcriptional factor GLI1, an effector of the Hedgehog pathway. Moreover, we have discovered that this newly identified SULF2-Wnt-GLI1 axis activates two major regulators of the HCC tumor microenvironment, transforming growth factor ¿ (TGF¿) and interleukin 6 (IL-6). We will use biochemical and cell biology methods, structural and functional analyses, and in vitro and in vivo approaches to systemically investigate the mechanistic role of the novel SULF2-Wnt-GLI1 axis in the HCC microenvironment and tumorigenesis. Successful completion of these studies will increase our understanding of the pathogenesis of HCC and allow future testing of rational strategies for treatment of HCC based on these findings. Overall, this proposal is potentially of high impact given the lack of effective treatments for advanced HCC. The findings from this research will also likely be generalizable to other cancer types because of the known involvement of SULF2, the Wnt pathway, and GLI1 in other tumors.