Aggressive fibromatosis (also called desmoid tumor) is a benign, locally invasive, soft tissue tumor composed of cells with mesenchymal characteristics. These tumors are characterized by increased levels of β-catenin–mediated T-cell factor (TCF)–dependent transcriptional activation. We found that type 1 IFN signaling is activated in human and murine aggressive fibromatosis tumors and that the expression of associated response genes is regulated by β-catenin. When mice deficient for the type 1 IFN receptor (Ifnar1−/−) were crossed with mice predisposed to developing aggressive fibromatosis tumors (Apc/Apc1638N), a significant decrease in aggressive fibromatosis tumor formation was observed compared with littermate controls, showing a novel role for type 1 IFN signaling in promoting tumor formation. Type 1 IFN activation inhibits cell proliferation but does not alter cell apoptosis or the level of β-catenin–mediated TCF-dependent transcriptional activation in aggressive fibromatosis cell cultures. Thus, these changes cannot explain our in vivo results. Intriguingly, Ifnar1−/− mice have smaller numbers of mesenchymal progenitor cells compared with littermate controls, and treatment of aggressive fibromatosis cell cultures with IFN increases the proportion of cells that exclude Hoechst dye and sort to the side population, raising the possibility that type 1 IFN signaling regulates the number of precursor cells present that drive aggressive fibromatosis tumor formation and maintenance. This study identified a novel role for IFN type 1 signaling as a positive regulator of neoplasia and suggests that IFN treatment is a less than optimal therapy for this tumor type. [Cancer Res 2007;67(15):7124–31]