Uterine receptivity to embryo implantation depends on appropriate progesterone (P4) and estrogen stimulation. P4 rapidly stimulates production of the morphogen Indian hedgehog (IHH) in murine uterine epithelium as well as downstream molecules in the hedgehog pathway such as Patched homolog 1 (PTCH1) and nuclear receptor subfamily 2, group F, member 2 (NR2F2) in uterine stroma. Studies using IHH-null mice indicate that IHH is obligatory for the normal P4 response in the uterus. To determine whether IHH induction in uterine epithelium is mediated through P4 receptor (PR) in epithelium (E) and/or stroma (S), we produced tissue recombinants using uteri from neonatal PR knockout (ko) mice and wild-type (wt) mice containing PR in S and/or E or lacking PR altogether using a tissue recombinant methodology and assessed their response to P4. In tissue recombinants containing wt-S (wt-S + wt-E and wt-S + ko-E), P4 induced Ihh mRNA expression at 6 h that was 6-fold greater than in oil-treated controls (P < 0.05; n = 6) in both types of tissue recombinants despite the absence of epithelial PR in wt-S + ko-E grafts. Conversely, Ihh mRNA expression was unaffected by P4 in ko-S + ko-E and ko-S + wt-E grafts despite epithelial PR expression in the latter. Nr2f2 and Ptch1 mRNA expression was similar in that it was stimulated by P4 only in recombinants containing stromal PR. These results indicate that stromal PR is both necessary and sufficient for P4 stimulation of epithelial IHH as well as downstream events such as PTCH1 and NR2F2 increases in stroma.