PSA may be elevated in non-malignant conditions such as prostatitis and leads to unnecessary prostate needle biopsy. Urine prostatic exosomal protein (PSEP) has been proved to be a promising biomarker of prostatic inflammation. The aim of this study is to determine the relationships between PSEP and the diagnosis of prostate cancer (PCa), and their association with histologic prostatic inflammation. Prostate needle biopsies from 674 patients were evaluated for the presence of histological inflammation and PCa. The urine PSEP levels were measured using an enzyme-linked immunosorbent assay kit. 286 cases were diagnosed as PCa and prostatic inflammation was observed in 33.7% of the biopsies. The presence of histological inflammation was significantly associated with a lower PCa risk (P < 0.001). The urine PSEP levels was significantly lower in PCa patients compared to the controls (P = 0.003). When subanalyzed by PSA levels, the difference was more evident in cases with PSA 4-10 ng/ml (P = 0.039). The urine PSEP levels was correlated with histological inflammation on prostate needle biopsy (P = 0.018, r = 0.12). Urine PSEP examination may be helpful to eliminate false positive PSA levels due to prostatic inflammation and reduce unnecessary prostate needle biopsy in cases with PSA grey zone.