Increasing evidence suggests that Kaposi's sarcoma (KS) arises from Kaposi's sarcoma-associated herpesvirus (KSHV)-infected mesenchymal stem cells (MSCs) through mesenchymal-to-endothelial transition (MEndT). KSHV infection promotes MSC differentiation of endothelial lineage and acquisition of tumorigeneic phenotypes. To understand how KSHV induces MEndT and transforms MSCs to KS cells, we investigated the mechanism underlying KSHV-mediated MSC endothelial lineage differentiation. Like embryonic stem cells, MSC differentiation and fate determination are under epigenetic control. Prospero homeobox 1 (PROX1) is a master regulator that controls lymphatic vessel development and endothelial differentiation. We found that the PROX1 gene in MSCs harbors a distinctive bivalent epigenetic signature consisting of both active marker H3K4me3 and repressive marker H3K27me3, which poises expression of the genes, allowing timely activation upon differentiation signals or environmental stimuli. KSHV infection effectively resolves the bivalent chromatin by decreasing H3K27me3 and increasing H3K4me3 to activate the PROX1 gene. vIL-6 signaling leads to the recruitment of MLL2 and SET1 complexes to the PROX1 promoter to increase H3K4me3, and the vGPCR-VEGF-A axis is responsible for removing PRC2 from the promoter to reduce H3K27me3. Therefore, through a dual signaling process, KSHV activates PROX1 gene expression and initiates MEndT, which renders MSC tumorigenic features including angiogenesis, invasion and migration. Author summaryNumerous parallelisms between development and cancer led to the concept that cancer is a development problem over the past 50 years. As our knowledge of epigenetic regulation is advancing, the similarities between development and cancer are becoming more apparent, providing further support to the theory. KSHV infection of mesenchymal stem cells (MSCs) may result in Kaposi's sarcoma (KS) through mesenchymal-to-endothelial transition (MEndT), a process resembling endothelial differentiation during development. KSHV initiates MEndT by activating the homeobox gene PROX1, a master regulator of the lymphatic endothelial cell differentiation, at the epigenetic level. Here we found that the PROX1 gene resides in bivalent domain chromatin in MSCs and KSHV infection resolves it through a dual signaling process to activates the PROX1 gene, which initiates MEndT and confers MSC KS-like phenotypes. The significance of this study is two-fold. First, the study elucidated the mechanism underlying KSHV-mediated MEndT and KS development at the transcription level. Second, KSHV uses two independent pathways to elevate activating histone modification and decrease repressive marker, respectively, to resolved bivalent chromatin, revealing a two-factor-authentication mechanism in the epigenetic regulation, which may grant a more efficient and accurate response to activate a gene in bivalent chromatin.