Background: Beta-catenin is part of a protein complex associated with adherens junctions. When allowed to accumulate to sufficient levels in its dephosphorylated form, beta-catenin serves as a transcriptional co-activator associated with a number of signaling pathways, including steroid hormone signaling pathways. Methods: To investigate the role of beta-catenin in progesterone (P-4) signaling and female reproductive physiology, conditional ablation of Ctnnb1 from the endometrial mesenchymal (i.e. stromal and myometrial), but not epithelial, compartment was accomplished using the Amhr2-Cre mice. Experiments were conducted to assess the ability of mutant female mice to undergo pregnancy and pseudopregnancy by or through oil-induced decidualization. The ability of uteri from mutant female mice to respond to estrogen (E-2) and P-4 was also determined. Results: Conditional deletion of Ctnnb1 from the mesenchymal compartment of the uterus resulted in infertility stemming, in part, from complete failure of the uterus to decidualize. E-2-stimulated epithelial cell mitosis and edematization were not altered in mutant uteri indicating that the mesenchyme is capable of responding to E-2. However, exposure of ovariectomized mutant female mice to a combined E-2 and P-4 hormone regimen consistent with early pregnancy revealed that mesenchymal beta-catenin is essential for indirectly opposing E-2-induced epithelial proliferation by P-4 and in some mice resulted in development of endometrial metaplasia. Lastly, beta-catenin is also required for the induced expression of genes that are known to play a fundamental role in decidualization such as Ihh, Ptch1, Gli1 and Muc1 Conclusions: Three salient points derive from these studies. First, the findings demonstrate a mechanistic linkage between the P-4 and beta-catenin signaling pathways. Second, they highlight an under appreciated role for the mesenchymal compartment in indirectly mediating P-4 signaling to the epithelium, a process that intimately involves mesenchymal beta-catenin. Third, the technical feasibility of deleting genes in the mesenchymal compartment of the uterus in an effort to understand decidualization and post-natal interactions with the overlying epithelium has been demonstrated. It is concluded that beta-catenin plays an integral role in selective P-4-directed epithelial-mesenchymal communication in both the estrous cycling and gravid uterus.