Mutation of the tumor suppressor Pten often leads to tumorigenesis in various organs including the uterus. We previously showed that Pten deletion in the mouse uterus using a Pgr-Cre driver (Pten^f/fPgr^Cre/+) results in rapid development of endometrial carcinoma (EMC) with full penetration. We also reported that Pten deletion in the stroma and myometrium using Amhr2-Cre failed to initiate EMC. Since the Pten^f/fPgr^Cre/+ uterine epithelium was primarily affected by tumorigenesis despite its loss in both the epithelium and stroma, we wanted to know if Pten deletion in epithelia alone will induce tumorigenesis. We found that mice with uterine epithelial loss of Pten under a Ltf-iCre driver (Pten^f/f/Ltf^Cre/+) develop uterine complex atypical hyperplasia (CAH), but rarely EMC even at 6 months of age. We observed that Pten^f/fPgr^Cre/+ uteri exhibit a unique population of cytokeratin 5 (CK5) and transformation related protein 63 (p63)-positive epithelial cells; these cells mark stratified epithelia and squamous differentiation. In contrast, Pten^f/fLtf^Cre/+ hyperplastic epithelia do not undergo stratification, but extensive epithelial cell apoptosis. This increased apoptosis is associated with elevation of TGFβ levels and activation of downstream effectors, SMAD2/3 in the uterine stroma. Our results suggest that stromal PTEN via TGFβ signaling restrains epithelial cell transformation from hyperplasia to carcinoma. In conclusion, this study, using tissue-specific deletion of Pten, highlights the epithelial-mesenchymal cross-talk in the genesis of endometrial carcinoma.