The role of squamous differentiation in pT1 bladder tumors in the response to intravesical chemotherapy was unknown. We performed a retrospective analysis of 213 pT1 bladder urothelial carcinoma patients with squamous differentiation (group1), the remaining 213 pT1 pure urothelial carcinoma served as controls (group2). All cases were treated with transurethral resection of bladder tumor and subsequent intravesical chemotherapy. Within a five-year period, the tumor recurrence rate was 75.1% (160/213) in group 1 and 64.3% (137/213) in group 2. Tumor grade (HR = 2.926, P = 0.014), number of tumors (HR = 2.130, P = 0.038), tumor size (HR = 2.748, P = 0.031), and squamous differentiation (HR = 3.726, P = 0.019) were found to be important prognostic factors. Subgroup analysis for high grade tumors was performed, finding that group 1 had higher recurrence rate (50.3% vs 36.3%; for group 2). Progression was found in 32.2% (30/160) of group1 and 15.1% (11/137) of group2 (P = 0.011). Our data suggests that squamous differentiation is a predictor of poor response for intravesical chemotherapy, and that early radical cystectomy should be performed for high grade tumors, especially when dealing with recurrent cases.