Deregulated transforming growth factor-β (TGFβ) signaling is a common feature of many epithelial cancers. Deletion of TGFβ receptor type 2 (TGFBR2) in fibroblast specific protein-1 (FSP1)-positive stromal cells induces squamous cell carcinoma in the murine forestomach, implicating fibroblast-derived hepatocyte growth factor (HGF) as the major driver of the epithelium carcinogenesis. Prior to cancer development, hyperproliferative FSP1+ fibroblasts lacking TGFBR2 accumulate in the forestomach, disrupting the regulatory signaling cross-talk with the forestomach epithelium. Here, concurrent loss in TGFBR2 and SMAD4 completely abrogates the development of forestomach cancer. Bone morphogenic protein-7 (BMP7) was highly upregulated in forestomach cancer tissue, activating Smad1/5/8 signaling, cell proliferation, and HGF production in TGFBR2-deficient FSP1+ fibroblasts. This stimulation by BMP7 was lost in the combined TGFBR2 and SMAD4 double knockout fibroblasts, which included a profound decrease in HGF expression. Thus, Smad4-mediated signaling is required to initiate epithelial carcinogenesis subsequent to TGFBR2 deletion in FSP1+ fibroblasts. Implications: These findings reveal a complex cross-talk between epithelial cells and the stroma, wherein Smad4 is required to elicit squamous cell carcinomas in the forestomach of mice with TGFBR2-deficient stromal cells.