ADP-ribosylation results from transfer of the ADP-ribose moiety of nicotinamide adenine dinucleotide (NAD) to an acceptor with ADP-ribose-acceptor content determined by the activities of ADP-ribosyltransferases, which modify the acceptor, and ADP-ribose-acceptor hydrolase (ARH), which cleave the ADP-ribose-acceptor bond. ARH1 was discovered as an ADP-ribose (arginine) protein hydrolase. Previously, we showed that ARH1-knockout and ARH1 heterozygous mice spontaneously developed tumors. Further, ARH1-knockout and ARH1 heterozygous mouse embryonic fibroblasts (MEFs) produced tumors when injected into nude mice. In tumors arising in ARH1 heterozygous mice and MEFs, we found both loss of heterozygosity (LOH) of the ARH1 gene and ARH1 gene mutations. In the present report, we found that these mutant ARH1 genes encode proteins with reduced ARH1 enzymatic activity. Moreover, MEFs transformed with ARH1 mutant genes exhibiting different levels of ARH1 activity showed altered rates of proliferation, anchorage-independent colony growth in soft agar, and tumorigenesis in nude mice. MEFs transformed with the wild-type (WT) gene, but expressing low levels of hydrolase activity were also tumorigenic. However, transformation with the WT gene was less likely to yield tumors than transformation with a mutant gene exhibiting similar hydrolase activity. Thus, control of protein-ADP-ribosylation by ARH1 is critical for tumorigenesis. In the human cancer database, LOH and mutations of the ARH1 gene were observed. Further, ARH1 gene mutations were located in exons 3 and 4, comparable to exons 2 and 3 of the murine ARH1 gene, which comprise the catalytic site. Thus, human ARH1 gene mutations similar to their murine counterparts may be involved in human cancers.