INI1/hSNF5 is a component of the ATP-dependent chromatin remodeling hSWI/SNF complex and a tumor suppressor gene of aggressive pediatric atypical teratoid and malignant rhabdoid tumors (AT/RT). To understand the molecular mechanisms underlying its tumor suppressor function, we studied the effect of reintroduction of INI1/hSNF5 into AT/RT-derived cell lines such as MON that carry biallelic deletions of the INI1/hSNF5 locus. We demonstrate that expression of INI1/hSNF5 causes G(0)-G(1) arrest and flat cell formation in these cells. In addition, INI1/hSNF5 repressed transcription of cyclin D1 gene in MON, in a histone deacetylase (HDAC)-dependent manner. Chromatin immunoprecipitation studies revealed that INI1/hSNF5 was directly recruited to the cyclin D1 promoter and that its binding correlated with recruitment of HDAC1 and deacetylation of histones at the promoter. Analysis of INI1/hSNF5 truncations indicated that cyclin D1 repression and flat cell formation are tightly correlated. Coexpression of cyclin D1 from a heterologous promoter in MON was sufficient to eliminate the INI1-mediated flat cell formation and cell cycle arrest. Furthermore, cyclin D1 was overexpressed in AT/RT tumors. Our data suggest that one of the mechanisms by which INI1/hSNF5 exerts its tumor suppressor function is by mediating the cell cycle arrest due to the direct recruitment of HDAC activity to the cyclin D1 promoter thereby causing its repression and G(0)-G(1) arrest. Repression of cyclin D1 gene expression may serve as a useful strategy to treat AT/RT.