Overexpression of S100A7 (psoriasin), a small calcium-binding protein, has been associated with the development of psoriasis and carcinomas in different types of epithelia, but its precise functions are still unknown. Using human tissue specimens, cultured cell lines, and a mouse model, we found that S100A7 is highly expressed in preinvasive, well-differentiated and early staged human squamous cell carcinoma of the oral cavity (SCCOC), but little or no expression was found in poorly differentiated, later-staged invasive tumors. Interestingly, our results showed that S100A7 inhibits both SCCOC cell proliferation in vitro and tumor growth/invasion in vivo. Furthermore, we demonstrated that S100A7 is associated with the beta-catenin complex, and inhibits beta-catenin signaling by targeting beta-catenin degradation via a noncanonical mechanism that is independent of GSK3beta-mediated phosphorylation. More importantly, our results also indicated that beta-catenin signaling negatively regulates S100A7 expression. Thus, this reciprocal negative regulation between S100A7 and beta-catenin signaling implies their important roles in tumor development and progression. Despite its high levels of expression in early stage SCCOC tumorigenesis, S100A7 actually inhibits SCCOC tumor growth/invasion as well as tumor progression. Downregulation of S100A7 in later stages of tumorigenesis increases beta-catenin signaling, leading to promotion of tumor growth and tumor progression.