Standard Raman spectroscopy (SRS) is a noninvasive technique that is used in the biomedical field to discriminate between normal and cancer cells. However, the presence of a strong fluorescence background detracts from the use of SRS in real-time clinical applications. Recently, we have reported a novel modulated Raman spectroscopy (MRS) technique to extract the Raman spectra from the background. In this paper, we present the first application of MRS to the identification of human urothelial cells (SV-HUC-1) and bladder cancer cells (MGH) in urine samples. These results are compared to those obtained by SRS. Classification using the principal component analysis clearly shows that MRS allows discrimination between Raman spectra of SV-HUC-1 and MGH cells with high sensitivity (98%) and specificity (95%). MRS is also used to distinguish between SV-HUC-1 and MGH cells after exposure to urine for up to 6 h. We observe a marked change in the MRS of SV-HUC-1 and MGH cells with time in urine, indicating that the conditions of sample collection will be important for the application of this methodology to clinical urine samples.