Estrogens, acting via estrogen receptors (ER) alpha and beta, exert direct and indirect actions on prostate growth and differentiation. Previous studies using animal models to determine the role of ERbeta in the prostate have been problematic because the centrally mediated response to estrogen results in reduced androgen levels and prostatic epithelial regression, potentially masking any direct effects via ERbeta. This study overcomes this problem by using the estrogen-deficient aromatase knockout mouse and tissue recombination to provide new insight into estrogen action on prostate growth and pathology. Homo- and heterotypic aromatase knockout tissue recombinants revealed stromal aromatase deficiency induced hyperplasia in normal prostatic epithelium due to disruption of paracrine interaction between stroma and epithelia. Treatment of tissue recombinants with an ERbeta-specific agonist demonstrated that stimulation of ERbeta elicits antiproliferative responses in epithelium that are not influenced by alterations to systemic androgen levels or the activation of ERalpha. Additionally, work performed with intact aromatase knockout mice demonstrated that the administration of an ERbeta-specific agonist ablated preexisting prostatic epithelial hyperplasia, whereas an ERalpha-specific agonist did not. Therefore, failed activation of ERbeta, resulting from local stromal aromatase deficiency, in conjunction with increased androgen levels, results in increased epithelial cell proliferation and prostatic hyperplasia. These data demonstrate essential and beneficial effects of estrogens that are necessary for normal growth of the prostate and distinguishes them from those that adversely alter prostate growth and differentiation. This highlights the potential of selective estrogen-receptor modulators, rather than aromatase inhibitors, for the management of dysregulated prostate growth.