Our previous studies have characterized mesenchyme-derived proteins to identify biologically active proteins and novel markers for stromal cell paracrine action relative to stromal-epithelial interactions. Previous reports have characterized properties of a growth inhibitory activity (to bladder and prostatic epithelial cells), secreted by U4F fetal rat urogenital sinus mesenchymal cells, not cross-reactive with antibodies to known cytokines, and provisionally termed UGIF. The present study reports the characterization, purification, and biological properties of a 20-21-kDa protein responsible for UGIF activity. The 20-21-kDa protein (termed ps20) was purified to near homogeneity, the amino-terminal sequence was determined, and biological properties were characterized in vitro. Amino-terminal sequence analysis indicated no direct matches or regions of homology with known proteins. Purified ps20 induced a linear and saturable inhibition of [3H]thymidine incorporation in PC-3 prostatic carcinoma cells (half-maximal activity at 2.6 nM), inhibited cell proliferation (increased population doubling time from 19.8 to 25.8 h), and induced a 210% stimulation in the synthesis of secreted proteins. These data suggest that ps20 may be a candidate paracrine effector protein and may play a role in stromal-epithelial cell interaction in the prostate gland.