Progesterone stimulates the expression of 17β-hydroxysteroid dehydrogenase (HSD) type 2, which catalyzes the conversion of the potent estrogen, E2, to an inactive form, estrone, in epithelial cells of human endometrial tissue. Various effects of progesterone on uterine epithelium have recently been shown to be mediated by stromal PRs in mice. We describe herein a critical paracrine mechanism whereby progesterone induction of 17β-HSD type 2 enzyme activity, transcript levels, and promoter activity in human endometrial epithelial cells are mediated primarily by PR in endometrial stromal cells. Medium conditioned with progestin-pretreated human endometrial stromal cells robustly increased 17β-HSD type 2 enzyme activity (2-fold) and mRNA levels (13.2-fold) in Ishikawa malignant endometrial epithelial cells. In contrast, direct progestin treatment of Ishikawa epithelial cells gave rise to much smaller increases in enzyme activity (1.2-fold) and mRNA levels (4-fold). These results suggest that progesterone- dependent paracrine factors arising from stromal cells are primarily responsible for the induction of epithelial 17β-HSD type 2 expression in the endometrium. We transfected serial deletion mutants of the −1,244 bp 5′-flanking region of the 17β-HSD type 2 gene into Ishikawa cells. No progesterone response elements could be identified upstream of the 17β-HSD type 2 promoter. Stromal PR-dependent induction of the 17β-HSD type 2 promoter was mediated by a critical regulatory region mapped to the −200/−100 bp sequence. Direct treatment of Ishikawa cells with progestin gave rise to a maximal increase in the activity of −200 bp/Luciferase construct only by 1.2-fold, whereas medium conditioned by progestin-pretreated endometrial stromal cells increased promoter activity up to 2.4-fold in a time- and concentration-dependent manner. The stimulatory effect of medium conditioned by progestin-pretreated stromal cells was enhanced strikingly by increasing stromal cell PR levels with the addition of estrogen. This epithelial-stromal interaction was specific for endometrial epithelial cells, since 17β-HSD type 2 could not be induced in malignant breast epithelial cells by media conditioned with progestin-treated breast or endometrial stromal cells. In conclusion, progesterone regulates the conversion of biologically active E2 to estrone by inducing the 17β-HSD type 2 enzyme in human endometrial epithelium primarily via PR in stromal cells, which secrete factors that induce transcription mediated primarily by the −200/−100 bp 5′-regulatory region of the 17β-HSD type 2 promoter.