It is not well understood how paracrine communication between basal and luminal cell populations in the mammary gland affects tumorigenesis. During ErbB2-induced mammary tumorigenesis, enriched mammary stem cells that represent a subpopulation of basal cells exhibit enhanced tumorigenic capacity compared with the corresponding luminal progenitors. Transcript profiling of tumors derived from basal and luminal tumor-initiating cells (TIC) revealed preferential loss of the noncanonical Wnt ligand WNT5A in basal TIC-derived tumors. Heterozygous loss of WNT5A was correlated with shorter survival of breast cancer patients. In a mouse model of ErbB2-induced breast cancer, Wnt5a heterozygosity promoted tumor multiplicity and pulmonary metastasis. As a TGFβ substrate, luminal cell-produced WNT5A induced a feed-forward loop to activate SMAD2 in a RYK and TGFβR1-dependent manner to limit the expansion of basal TIC in a paracrine fashion, a potential explanation for the suppressive effect of WNT5A in mammary tumorigenesis. Our results identify the WNT5A/RYK module as a spatial regulator of the TGFβ-SMAD signaling pathway in the context of mammary gland development and carcinogenesis, offering a new perspective on tumor suppression provided by basal-luminal cross-talk in normal mammary tissue.