The tumor microenvironment (TME) – the dynamic tissue space in which the tumor exists – plays a significant role in tumor initiation and is a key contributor in cancer progression; however, little is known about tumor-induced changes in the adjacent tissue stroma. Herein, we sought to explore tumor-induced changes in the TME at the morphological and molecular level to further characterize cancer progression. We show that tumor-adjacent mammary glands (TAGs) display altered branching morphology, expansion of myofibroblasts, and increased mammosphere formation, broadly suggesting a tumor-induced field effect. FACS analysis showed that TAGs contain an increased number of Lin-CD24+/CD49+ enriched mammary gland stem cells (MaSCs), suggesting deregulated tissue homeostasis in TAGs. Comparative transcriptome analysis of TAGs and contralateral control glands coupled with meta-analysis on differentially expressed genes with two breast cancer stromal patient microarray datasets identified shared upregulation of STAT1. Knockdown of STAT1 in cancer associated fibroblast (CAFs) cocultured with human breast cancer cells altered cancer cell proliferation, further suggesting the role of STAT1 as a stromal contributor of tumorigenesis. Furthermore, depletion of STAT1 in CAFs significantly reduced periductal reactive fibrosis and delayed early breast cancer progression in vivo. Lastly, co-treatment with fludarabine, a FDA-approved STAT1 activation inhibitor and DNA synthesis inhibitor, in combination with doxorubicin, showed enhanced therapeutic efficacy in treating mouse mammary gland tumors. Taken together, our results demonstrate that stromal STAT1 expression promotes tumor progression and is a potential therapeutic target for breast cancer.