Ovarian hormones control mammary gland development and impinge on breast carcinogenesis acting via their cognate receptors in the luminal epithelium. The extracellular matrix has a key role in physiology and disease but how the two are linked is poorly understood. Here we show that deletion of the secreted protease Adamts18 delays mammary gland development. The protease’s role is mammary epithelial intrinsic and required for stem cell function and epithelial regeneration potential. Progesterone controls Adamts18 in the myoepithelium through upregulation of Wnt-4 expression with ensuing canonical Wnt signaling activation in basal cells. IP-Mass Spec shows that ADAMTS18 has binding partners located in the ECM and basement membrane. Consistent with Adamts18 being an important regulator of ECM function, deletion results in increased Collagen I and IV, Laminin, and Fibronectin deposition and synergizes genetically with the basal membrane proteoglycan Collagen18a1 in controlling mammary stem cell function. In vitro, Collagen18a1 and Fibronectin are cleaved by Adamts18. RNAseq analysis reveals that the stem cell regulatory hippo pathway is downstream of Adamts18 with consequent reduction of Fgfr2 expression. Our findings link hormonal signaling in luminal mammary epithelial cells to ECM remodeling via Adamts18, and demonstrate the importance of the ECM for stem cell function in the mammary gland.