We have previously reported the identification of a novel WD-domain protein, STRAP that plays a role in maintenance of mesenchymal morphology by regulating E-cadherin and that enhances tumorigenicity partly by downregulating CDK inhibitor p21^Cip1. However, the functional mechanism of regulation of E-cadherin and p21^Cip1 by STRAP is unknown. Here, we have employed STRAP knock out and knockdown cell models (mouse embryonic fibroblast, human cancer cell lines) to show how STRAP downregulates E-cadherin and p21^Cip1 by abrogating the binding of Sp1 to its consensus binding sites. Moreover, ChIP assays suggest that STRAP recruits HDAC1 to Sp1 binding sites in p21^Cip1 promoter. Interestingly, loss of STRAP can stabilize Sp1 by repressing its ubiquitination in G1 phase, resulting in an enhanced expression of p21^Cip1 by >4.5-fold and cell cycle arrest. Using Bioinformatics and Microarray analyses, we have observed that 87% mouse genes downregulated by STRAP have conserved Sp1 binding sites. In NSCLC, the expression levels of STRAP inversely correlated with that of Sp1 (60%). These results suggest a novel mechanism of regulation of E-cadherin and p21^Cip1 by STRAP by modulating Sp1-dependent transcription, and higher expression of STRAP in lung cancer may contribute to downregulation of E-cadherin and p21^Cip1 and to tumor progression.