Stromal cells can direct differentiation of epithelial progenitor cells during organ development. FGF signaling is essential for submandibular salivary gland development. Through stromal fibroblast cells, FGF2 can indirectly regulate proacinar cell differentiation in organoids but the mechanisms are not understood. We performed scRNA-Seq and identified multiple stromal cell subsets, including Pdgfrα+ stromal subsets expressing both Fgf2 and Fgf10. When combined with epithelial progenitor cells in organoids, MACS-sorted PDGFRα+ cells promoted proacinar differentiation similarly to total stroma. Gene expression analysis revealed that FGF2 increases multiple stromal genes, including Bmp2 and Bmp7. Both BMP2 and BMP7 synergized with FGF2 stimulating proacinar differentiation, but not branching. However, stromal cells grown without FGF2 did not support proacinar organoid differentiation and instead differentiated into myofibroblasts. In organoids, TGFβ1 treatment stimulate myofibroblast differentiation and inhibited the epithelial progenitor cell's proacinar differentiation. Conversely, FGF2 reversed the TGFβ1's effects. We also demonstrated that adult salivary stromal cells were FGF2 responsive and could promote proacinar differentiation. These FGF2 signaling pathways may have applications in future regenerative therapies.