Histone deacetylase inhibitors (HDI) have been reported to inhibit the growth and survival of cancer cells while leaving normal cells untouched. However, the mechanisms underlying this selective cell death are poorly understood. Gene expression analysis revealed that HDI treatment induced up-regulation of p21(WAF1/Cip1) and down-regulation of ErbB2 in cancer cells but not normal cells. Overexpression of p21(WAF1/Cip1) and/or silencing of ErbB2 enhanced cancer cell growth inhibition, suggesting that HDI-induced up-regulation/down-regulation of these genes play critical roles in HDI-induced growth inhibition of cancer cells. Most importantly, we found that the gene silencing factor methyl CpG-binding domain protein 3 (MBD3) was not only released from cancer-selective promoter of the HDI up-regulated p21(WAF1/Cip1) gene but also recruited to that of the HDI-down-regulated ErbB2 gene. Furthermore, silencing of MBD3 by small interfering RNA abrogated the HDI-induced gene regulation and growth inhibition in lung cancer but not in normal cells. Together, our results support the critical potential of MBD3 in HDI-induced cancer-selective cell death via cancer differential gene expression.