Although tissue microenvironments play critical roles in epithelial development and tumorigenesis, the factors mediating these effects are poorly understood. In this work, we used a genomic approach to identify factors produced by cells in the microenvironment of basal cell carcinoma (BCC) of the skin, one of the most common human cancers. The global gene expression programs of stromal cell cultures derived from human BCCs showed consistent, systematic differences from those derived from nontumor skin. The gene most consistently expressed at a higher level in BCC tumor stromal cells compared with those from nontumor skin was GREMLIN 1, which encodes a secreted antagonist of the bone morphogenetic protein (BMP) pathway. BMPs and their antagonists are known to play a crucial role in stem and progenitor cell biology as regulators of the balance between expansion and differentiation. Consistent with the hypothesis that BMP antagonists might have a similar role in cancer, we found GREMLIN 1 expression in the stroma of human BCC tumors but not in normal skin in vivo. Furthermore, BMP 2 and 4 are expressed by BCC cells. Ex vivo, BMP inhibits, and Gremlin 1 promotes, proliferation of cultured BCC cells. We further found that GREMLIN 1 is expressed by stromal cells in many carcinomas but not in the corresponding normal tissue counterparts that we examined. Our data suggest that BMP antagonists may be important constituents of tumor stroma, providing a favorable microenvironment for cancer cell survival and expansion in many cancers.