Activation of the decidual PRL (dPRL) promoter, a major differentiation marker in human endometrial stromal (ES) cells, by cAMP is effected through the induction and binding of CCAAT/enhancer-binding protein-beta (C/EBPbeta) to two overlapping cognate response elements in the promoter region dPRL-332/-270. Progesterone is essential for decidualization and potently enhances cAMP-dependent dPRL promoter activity. We now demonstrate that both liganded PR isoforms, PR-A and PR-B, are capable of trans-activating the dPRL-332/-270 region. The absence of a palindromic progesterone response element (PRE) within this promoter region suggested cross-coupling between C/EBPbeta and PR in human ES cells. Physical interaction between these distinct transcription factors was confirmed by glutathione-S-transferase pull-down assays, demonstrating that both C/EBPbeta isoforms, the full-length activator liver-enriched activatory protein (LAP) and the truncated inhibitor liver-enriched inhibitory protein (LIP), can bind PR-B as well as PR-A in vitro. Transient transfection studies in primary ES cells were used to examine the consequences of PR and C/EBPbeta interaction on activation of their respective response elements. Activation of mouse mammary tumor virus promoter or a reporter construct containing two isolated palindromic PREs by liganded PR-B was synergistically enhanced by coexpression of LIP, but not LAP. In contrast, PR-A failed to trans-activate these constructs significantly regardless of the presence of either C/EBPbeta isoform. Conversely, LAP-dependent activation of the dPRL-332/-270 region or a reporter construct driven by a single C/EBPbeta response element was greatly enhanced by PR-A, but not PR-B, in a ligand-dependent manner. These observations reveal that PR and C/EBPbeta isoform ratios are important determinants of the cellular response to ovarian progesterone in the reproductive tract; the predominance of PR-A and LAP favors expression of C/EBPbeta-dependent genes, whereas PR-B and LIP cooperate in activating PRE-driven promoters.