Regulation of gene transcription by the progesterone receptor (PR) in cooperation with coactivator/corepressor complexes coordinates crucial processes in female reproduction. To investigate functional relationships between PR and steroid receptor coactivators (SRCs) in distinct cell types of uterine tissue during gene transcription, we generated a new transgenic mouse model utilizing a Progesterone Receptor Activity Indicator (PRAI) system that could monitor PR activity in vivo. The PRAI system consists of a modified PR bacterial artificial chromosome (BAC) clone in which the DNA binding domain of the PR was replaced with the yeast Gal4 DNA binding domain. A humanized green fluorescent protein (hrGFP) reporter controlled by the Upstream Activating Sequences for the Gal4 gene (UAS(G)) was inserted in tandem with the modified PR gene. Expression of hrGFP in the uterus demonstrated that the PRAI animal model faithfully replicated PR signaling under various endocrine states. Bigenic PRAI-SRC-1(-/-) mice revealed that SRC-1 modulates PR activity in the uterus in a cell-specific fashion and is involved in PR gene activation in stroma and myometrium of the uterus in response to estrogen and progesterone. In contrast, SRC-1 was involved in the down-regulation of PR target gene expression in the luminal and glandular epithelial compartments of the uterus after chronic progesterone treatment. Finally, we dissected the means by which SRC-1 dynamically regulates PR activity in each uterine cell compartment and demonstrated that it involves the differential ability of SRC-1 to modulate expression levels of distinct coactivators, corepressors, and PR in a cell-specific fashion.