One of the major challenges in the development of prostate cancer prognostic biomarkers is the cellular heterogeneity in tissue samples. We developed an objective Cluster-Correlation (CC) analysis to identify gene expression changes in various cell types that are associated with progression. In the Cluster step, samples were clustered (unsupervised) based on the expression values of each gene through a mixture model combined with a multiple linear regression model in which cell-type percent data were used for decomposition. In the Correlation step, a Chi-square test was used to select potential prognostic genes. With CC analysis, we identified 324 significantly expressed genes (68 tumor and 256 stroma cell expressed genes) which were strongly associated with the observed biochemical relapse status. Significance Analysis of Microarray (SAM) was then utilized to develop a seven-gene classifier. The Classifier has been validated using two independent Data Sets. The overall prediction accuracy and sensitivity is 71% and 76%, respectively. The inclusion of the Gleason sum to the seven-gene classifier raised the prediction accuracy and sensitivity to 83% and 76% respectively based on independent testing. These results indicated that our prognostic model that includes cell type adjustments and using Gleason score and the seven-gene signature has some utility for predicting outcomes for prostate cancer for individual patients at the time of prognosis. The strategy could have applications for improving marker performance in other cancers and other diseases.