Estradiol (E2) stimulates the growth and inflammation in the ectopic endometriotic tissue that commonly resides on the pelvic organs. Several clinical and laboratory-based observations are indicative of resistance to progesterone action in endometriosis. The molecular basis of progesterone resistance in endometriosis may be related to an overall reduction in the levels of progesterone receptor (PR). In normal endometrium, progesterone acts via PR on stromal cells to induce secretion of paracrine factor(s) that in turn stimulate neighboring epithelial cells to express the enzyme 17beta-hydroxysteroid dehydrogenase type 2 (HSD17B2). HSD17B2 is an extremely efficient enzyme and rapidly metabolizes the biologically potent estrogen E2 to weakly estrogenic estrone. In endometriotic tissue, progesterone is incapable of inducing epithelial HSD17B2 expression due to a defect in stromal cells. The inability of endometriotic stromal cells to produce progesterone-induced paracrine factors that stimulate HSD17B2 may be due to the very low levels of PR observed in vivo in endometriotic tissue. The end result is deficient metabolism of E2 in endometriosis giving rise to high local concentrations of this mitogen. The molecular details of this physiological paracrine interaction between the stroma and epithelium in normal endometrium and its lack thereof in endometriosis are discussed.