Deletion of tumor suppressor genes in stromal fibroblasts induces epithelial cancer development, suggesting an important role of stroma in epithelial homoeostasis. However, the underlying mechanisms remain to be elucidated. Here we report that deletion of the gene encoding TGFβ receptor 2 (Tgfbr2) in the stromal fibroblasts (Tgfbr2^fspKO) induces inflammation and significant DNA damage in the neighboring epithelia of the forestomach. This results in loss or down-regulation of cyclin-dependent kinase inhibitors p15, p16, and p21, which contribute to the development of invasive squamous cell carcinoma (SCC). Anti-inflammation treatment restored p21 expression, delayed tumorigenesis, and increased survival of Tgfbr2^fspKO mice. Our data demonstrate for the first time that inflammation is a critical player in the epigenetic silencing of p21 in tumor progression. Examination of human esophageal SCC showed a down-regulation of TGFβ receptor 2 (TβRII) in the stromal fibroblasts, as well as increased inflammation, DNA damage, and loss or decreased p15/p16 expression. Our study suggests anti-inflammation may be a new therapeutic option in treating human SCCs with down-regulation of TβRII in the stroma.