Endostatin, a proteolytic fragment of collagen XVIII, is a potent inhibitor of angiogenesis and tumor growth. We studied the development of carcinogen-induced skin tumors in transgenic J4 mice overexpressing endostatin in their keratinocytes. Unexpectedly, we did not observe any differences in tumor incidence and multiplicity between these and control mice, nor in the rate of conversion of benign papillomas to malignant squamous cell carcinomas (SCC). We did find, however, that endostatin regulates the terminal differentiation of keratinocytes because the SCCs in the J4 mice were less aggressive and more often well differentiated than those in the control mice. We observed an inhibition of tumor angiogenesis by endostatin at an early stage in skin tumor development, but more strikingly, there was a significant reduction in lymphatic vessels in the papillomas and SCCs in association with elevated endostatin levels and also a significant inhibition of lymph node metastasis in the J4 mice. We showed that tumor-infiltrating mast cells strongly expressed vascular endothelial growth factor-C (VEGF-C), and that the accumulation of these cells was markedly decreased in the tumors of the J4 mice. Moreover, endostatin inhibited the adhesion and migration of murine MC/9 mast cells on fibronectin in vitro. Our data suggest that endostatin can inhibit tumor lymphangiogenesis by decreasing the VEGF-C levels in the tumors, apparently via inhibition of mast cell migration and adhesion, and support the view that the biological effects of endostatin are not restricted to endothelial cells because endostatin also regulates tumor-associated inflammation and differentiation, and the phenotype of epithelial tumors. [Cancer Res 2007;67(24):11528–35]