The opposing actions of estrogen and progesterone during the menstrual cycle regulate the cyclical and predictable endometrial proliferation and differentiation that is required for implantation. Progesterone indirectly stimulates the expression of 17beta hydroxysteroid dehydrogenase type 2 (HSD17B2), which catalyzes the conversion of biologically potent estradiol to weakly estrogenic estrone in the endometrial epithelium. We previously demonstrated upregulation of the HSD17B2 gene in human endometrial epithelial cells by factors secreted from endometrial stromal cells in response to progesterone. We investigated the underlying mechanism by which these stroma-derived, progesterone-induced paracrine factors stimulate HSD17B2 expression. Here, we show that transcription factors SP1 and SP3 interact with specific motifs in HSD17B2 promoter to upregulate enzyme expression in human endometrial epithelial cell lines. Conditioned medium (CM) from progestin-treated stromal cells increased levels of SP1 and SP3 in endometrial epithelial cells and induced HSD17B2 mRNA expression. Mithramycin A, an inhibitor of SP1-DNA interaction, reduced epithelial HSD17B2 promoter activity in a dose-dependent manner. Serial deletion and site-directed mutants of the HSD17B2 promoter demonstrated that two overlapping SP1 motifs (nt -82/-65) are essential for induction of promoter activity by CM or overexpression of SP1/SP3. CM markedly enhanced, whereas anti-SP1/SP3 antibodies inhibited, binding of nuclear proteins to this region of the HSD17B2 promoter. In vivo, we demonstrated a significant spatiotemporal association between epithelial SP1/SP3 and HSD17B2 levels in human endometrial biopsies. Taken together, these data suggest that HSD17B2 expression in endometrial epithelial cells, and, therefore, estrogen inactivation, is regulated by SP1 and SP3, which are downstream targets of progesterone-dependent paracrine signals originating from enclometrial stromal cells.