Abstract Prostatic development is induced by androgens acting via mesenchymal–epithelial interactions. Androgens elicit their morphogenetic effects by acting through androgen receptors (ARs) in urogenital sinus mesenchyme (UGM), which induces prostatic epithelial development. In adulthood reciprocal homeostatic stromal–epithelial interactions maintain functional differentiation and growth-quiescence. Testosterone plus estradiol (T+E2) have been shown to induce prostatic carcinogenesis in animal models. Thus, tissue recombinant studies were undertaken to explore the mechanisms of prostatic carcinogenesis in BPH-1 cells in which ARs and estrogen receptors (ERs) are undetectable. For this purpose, BPH-1 cells were combined with UGM, and the UGM+BPH-1 recombinants were grafted to adult male hosts. Solid branched epithelial cords and ductal structures formed in untreated UGM+BPH-1 recombinants. Growth was modest, and tumors did not develop. UGM+BPH-1 recombinants treated with T+E2 formed invasive carcinomas. BPH-1 cells lack ARs and ERs, whereas rat UGM expresses both of these receptors. These data show that immortalized nontumorigenic human prostatic epithelial cells can undergo hormonal carcinogenesis in response to T+E2 stimulation via paracrine mechanisms and demonstrate that the stromal environment plays an important role in mediating hormonal carcinogenesis. During prostatic carcinogenesis the stroma undergoes progressive loss of smooth muscle with the appearance of carcinoma-associated fibroblasts (CAF). This altered stroma was tested for its ability to promote carcinogenesis of nontumorigenic but immortalized human prostatic epithelial cells (BPH-1). CAF+BPH-1 tissue recombinants formed large carcinomas. In contrast, recombinants composed of normal prostatic stroma+BPH-1 cells exhibited minimal growth. This stroma-induced malignant transformation was associated with additional genetic alterations and changes in gene expression. Thus, alteration in the stromal microenvironment was sufficient to promote malignant transformation of human prostatic epithelial cells.