Hypermethylation of tumor suppressor genes is central to the pathogenesis of human malignancy, yet this alteration's etiology remains unclear, and its clinical impact has not yet been studied using an approach that can yield directly generalizable results. Therefore, we sought to examine both of these issues in bladder cancer, seeking to understand the characteristics of epidemiologically well-defined patient tumors with differing levels of methylation silencing. We analyzed epigenetic silencing of 16 genes in a population-based incident case series of 331 bladder transitional cell carcinomas. We utilized a novel item response theory (IRT) model, to examine, in an unbiased fashion, the relationship of patient characteristics, carcinogen exposure history and tumor characteristics with the underlying propensity for gene hypermethylation. Age, male gender and current cigarette smoking were significantly positively associated with the methylation latent trait. Promoter hypermethylation as a latent trait significantly predicted both non-invasive/high-grade and invasive stage disease and was also significantly associated with survival, with each unit increase in the latent trait resulting in a 30% increase in the risk of death. This work, studying all stages and grades of incident bladder cancer, provides definitive evidence that carcinogen exposures play a critical role in selecting these alterations in tumorous clones and that epigenetic silencing is a strong and significant predictor of tumor stage and overall patient survival. Finally, our novel approach provides insight into the etiology of promoter hypermethylation, suggesting that selected, carcinogen-exposed individuals have a greater propensity for hypermethylation that is associated with more aggressive, fatal disease.