A method of handling proximity service (ProSe) in a wireless communication system is disclosed. The method includes transmitting, by a mobile device of the wireless communication system, a request message to one of the plurality Mobility Management Entities (MMEs) of the wireless communication system, for requesting a proximity service (ProSe) service; and indicating, by the one of the plurality of MMEs, to the mobile device a ProSe capability of a system network of the wireless communication system in an accept message.