An enormous body of knowledge about the biology of stem cells and their role in development, tissue homeostasis and cancer formation has been gained in the last 20 years. This review gives a comprehensive overview on knowledge about localization and regulation of normal gastrointestinal stem cells and links it to our understanding of gastrointestinal tumourigenesis and malignant progression in the light of the cancer stem cell concept. The focus is on intestinal stem cells and newly identified stem cell factors, such as the β-catenin target gene Lgr5. The basis of intestinal stem cell regulation is a permanent crosstalk between epithelial and underlying mesenchymal cells in the intestinal stem cell niche. This crosstalk is mediated by crucial pathways, including the Wnt, Hedgehog (HH), Notch, PI3K and BMP pathways. Disturbances in this fine-regulated interaction can both initiate intestinal tumours and, in association with additional genetic alterations or environmental activation of embryonic processes such as epithelial–mesenchymal transition (EMT), lead to tumour invasion and metastasis. Copyright © 2008 Pathological Society of Great Britain and Ireland. Published by John Wiley & Sons, Ltd.