Despite extensive research, the precise mechanism of mammary carcinogenesis is unknown. We have developed an animal model in which a high incidence of mammary cancer can be induced within a period of several months using a combination of testosterone (T) and 17beta-estradiol (E2) without the addition of carcinogens. The induced mammary tumours mimic closely the human breast cancer in terms of histopathology. Our results showed that the two sex hormones work synergistically to induce a higher incidence of mammary cancer than either hormone treatment alone. The dosage of T affects only the latency period of mammary cancer but not the final incidence. The results further showed that treatment of T, either alone or in combination with E2, there was overexpression of the androgen receptor (AR) in alveolar or ductal epithelial cells but not in stromal cells. Together with overexpression of AR in epithelial cells, there was an increase in perialveolar and interlobular connective tissue as well as a decrease in surrounding adipose tissue, despite the absence of AR in stromal cells. There was also an increase in proliferation rate of fibroblast-like cells in stroma. These changes were blocked by implantation of flutamide, an antiandrogen, indicating that androgens play a crucial role in the process. These findings highlight that the effect of androgens on the stroma, may be through a paracrine action of epithelial cells. The changes in the stroma may, in turn, promote mammary carcinogeneis in a reciprocal manner.