In epithelial tissues, the lineage relationship between normal progenitor cells and cell type(s) of origin for cancer has been poorly understood. Here we show that a known regulator of prostate epithelial differentiation, the homeobox gene Nkx3-1, marks a stem cell population that functions during prostate regeneration. Genetic lineage-marking demonstrates that rare luminal cells that express Nkx3-1 in the absence of testicular androgens (castration-resistant Nkx3-1-expressing cells, CARNs) are bipotential and can self-renew in vivo, and single-cell transplantation assays show that CARNs can reconstitute prostate ducts in renal grafts. Functional assays of Nkx3-1 mutant mice in serial prostate regeneration suggest that Nkx3-1 is required for stem cell maintenance. Furthermore, targeted deletion of the Pten tumour suppressor gene in CARNs results in rapid carcinoma formation after androgen-mediated regeneration. These observations indicate that CARNs represent a new luminal stem cell population that is an efficient target for oncogenic transformation in prostate cancer.