Estrogens and progesterone control breast development and carcinogenesis via their cognate receptors expressed in a subset of luminal cells in the mammary epithelium. How they control the extracellular matrix, important to breast physiology and tumorigenesis, remains unclear. Here we report that both hormones induce the secreted protease Adamts18 in myoepithelial cells by controlling Wnt4 expression with consequent paracrine canonical Wnt signaling activation. Adamts18 is required for stem cell activation, has multiple binding partners in the basement membrane and interacts genetically with the basal membrane-specific proteoglycan, Col18a1, pointing to the basement membrane as part of the stem cell niche. In vitro, ADAMTS18 cleaves fibronectin; in vivo, Adamts18 deletion causes increased collagen deposition during puberty, which results in impaired Hippo signaling and reduced Fgfr2 expression both of which control stem cell function. Thus, Adamts18 links luminal hormone receptor signaling to basement membrane remodeling and stem cell activation.