The initiation of an intestinal tumour is a probabilistic process that depends on the competition between mutant and normal epithelial stem cells in crypts(1). Intestinal stem cells are closely associated with a diverse but poorly characterized network of mesenchymal cell types(2,3). However, whether the physiological mesenchymal microenvironment of mutant stem cells affects tumour initiation remains unknown. Here we provide in vivo evidence that the mesenchymal niche controls tumour initiation in trans. By characterizing the heterogeneity of the intestinal mesenchyme using single-cell RNA-sequencing analysis, we identified a population of rare pericryptal Ptgs2-expressing fibroblasts that constitutively process arachidonic acid into highly labile prostaglandin E-2 (PGE(2)). Specific ablation of Ptgs2 in fibroblasts was sufficient to prevent tumour initiation in two different models of sporadic, autochthonous tumorigenesis. Mechanistically, single-cell RNA-sequencing analyses of a mesenchymal niche model showed that fibroblast-derived PGE(2) drives the expansion omicron f a population of Sca-1(+) reserve-like stem cells. These express a strong regenerative/tumorigenic program, driven by the Hippo pathway effector Yap. In vivo, Yap is indispensable for Sca-1(+) cell expansion and early tumour initiation and displays a nuclear localization in both mouse and human adenomas. Using organoid experiments, we identified a molecular mechanism whereby PGE(2) promotes Yap dephosphorylation, nuclear translocation and transcriptional activity by signalling through the receptor Ptger4. Epithelial-specific ablation of Ptger4 misdirected the regenerative reprogramming of stem cells and prevented Sca-1(+) cell expansion and sporadic tumour initiation in mutant mice, thereby demonstrating the robust paracrine control of tumour-initiating stem cells by PGE(2)-Ptger4. Analyses of patient-derived organoids established that PGE(2)-PTGER4 also regulates stem-cell function in humans. Our study demonstrates that initiation of colorectal cancer is orchestrated by the mesenchymal niche and reveals a mechanism by which rare pericryptal Ptgs2-expressing fibroblasts exert paracrine control over tumour-initiating stem cells via the druggable PGE(2)-Ptger4-Yap signalling axis. Single-cell RNA-sequencing analysis of intestinal mesenchyme identified a population of fibroblasts that produce prostaglandin E-2, which, when disrupted, prevented initiation of intestinal tumours.