The SYT proto-oncoprotein (also known as SS18) is a gene expression regulator conserved across species. Although its biological function is still unknown, the importance of SYT as a housekeeping protein is illustrated by the lethal phenotype of SYT-null embryos. Notably, SYT is a component of the synovial sarcoma-associated translocation product, the SYT-SSX oncogene. SYT was previously reported as a mediator of cell adhesion. In the present study we show that SYT possesses distinct domains that control MDCK cyst formation in three-dimensional collagen cultures. While the carboxy-half of SYT, the QPGY domain, is required for cyst growth, the amino-terminal region appears to exert on this process a regulatory effect. Further analysis suggested that the purinergic G protein-coupled P2Y receptor signaling is involved in SYT-induced cystogenesis. Activation of this cascade is due to facilitation of ATP release in the extracellular space of polarized MDCK cells by SYT. These studies allow us to begin to understand the vital role of SYT in controlling epithelial morphogenesis and might explain the lethality of its loss in the developing embryo.