The role of the local microenvironment in influencing cell behavior is central to both normal development and cancer formation. Here, we show that sprouty 1 (SPRY1) modulates the microenvironment to enable proper mammary branching morphogenesis. This process occurs through negative regulation of epidermal growth factor receptor (EGFR) signaling in mammary stroma. Loss of SPRY1 resulted in up-regulation of EGFR-extracellular signal-regulated kinase (ERK) signaling in response to amphiregulin and transforming growth factor alpha stimulation. Consequently, stromal paracrine signaling and ECM remodeling is augmented, leading to increased epithelial branching in the mutant gland. By contrast, down-regulation of EGFR-ERK signaling due to gain of Sprouty function in the stroma led to stunted epithelial branching. Taken together, our results show that modulation of stromal paracrine signaling and ECM remodeling by SPRY1 regulates mammary epithelial morphogenesis during postnatal development.branching morphogenesis | FGF signaling | EGF signaling | epithelial-stromal interactions | stromal microenvironment A central theme in developmental and cancer biology research is to understand the mechanisms by which the local microenvironment, or niche, influences fundamental aspects of cell and tissue behavior during organ formation and function (1). The importance of mesenchyme, as the embryonic niche, in determining organ identity and fate of the epithelium was demonstrated long ago by classic embryological studies (2, 3). More recent studies have shown, however, that postnatal stroma, a derivative of embryonic mesenchyme, is essential for maintenance of cell fate and differentiation status in adult life (4, 5). Indeed, abnormal stroma can lead to the formation of a cancer microenvironment, and it plays a causative role during tumor onset and progression (1, 6). As such, understanding postnatal stromal biology and the mechanism by which its deregulation may promote tumorigenesis is of key importance.The mouse mammary gland is a powerful model for understanding the genetic and cellular basis of stromal biology (7). The observation that epithelial branching of the mammary gland persists for many weeks after birth has made amenable the detection of stromal influences on epithelial invasion and patterning (8, 9). Indeed, postnatal mammary stroma is composed of many cell types, including periductal fibroblasts and white adipocytes, endothelial cells, nerve cells, and a variety of infiltrating immune cells, including macrophages and eosinophils, which play an important role in postnatal branching (10).Mammary stroma regulates epithelial branching by at least two mechanisms. Stromal cells produce several paracrine factors, including fibroblast growth factors (FGFs) and insulin-like growth factor (IGF) that activate receptor tyrosine kinases (RTK) (11, 12). For example, a reduction in FGF signaling due to loss of FGF10 or its receptor FGF receptor 1/2 (FGFR1/2), or reduced IGF signaling, leads to stunted epithelial branching (13-16). B...