Extracellular matrix and extracellular matrix-degrading matrix metalloproteinases play a key role in interactions between the epithelium and the mesenchyme during mammary gland development and disease. In patients with breast cancer, the mammary mesenchyme undergoes a stromal reaction, the etiology of which is unknown. We previously showed that targeting of an autoactivating mutant of the matrix metalloproteinase stromelysin-1 to mammary epithelia of transgenic mice resulted in reduced mammary function during pregnancy and development of preneoplastic and neoplastic lesions. Here we examine the cascade of alterations before breast tumor formation in the mammary gland stroma once the expression of the stromelysin-1 transgene commences. Beginning in postpubertal virgin animals, low levels of transgene expression in mammary epithelia led to increased expression of endogenous stromelysin-1 in stromal fibroblasts and up-regulation of other matrix metalloproteinases, without basement membrane disruption. These changes were accompanied by the progressive development of a compensatory reactive stroma, characterized by increased collagen content and vascularization in glands from virgin mice. This remodeling of the gland affected epithelial-mesenchymal communication as indicated by inappropriate expression of tenascin-C starting by day 6 of pregnancy. This, together with increased transgene expression, led to basement membrane disruption starting by day 15 of pregnancy. We propose that the highly reactive stroma provides a prelude to breast epithelial tumors observed in these animals.