Implantation is initiated when the embryo attaches to the uterine luminal epithelium during early pregnancy. Following this event, uterine stromal cells undergo steroid hormone-dependent transformation into morphologically and functionally distinct decidual cells in a unique process known as decidualization. An angiogenic network is also formed in the uterine stromal bed, critically supporting the early development of the embryo. The steroid-induced mechanisms that promote stromal differentiation and endothelial proliferation during decidualization are not fully understood. Although the role of ovarian progesterone as a key regulator of decidualization is well established, the requirement of ovarian estrogen (E) during this process remains unresolved. Here we show that the expression of P450 aromatase, a key enzyme that converts androgens to E, is markedly induced in mouse uterine stromal cells undergoing decidualization. The aromatase then acts in conjunction with other steroid biosynthetic enzymes present in the decidual tissue to support de novo synthesis of E. This locally produced E is able to support the advancement of the stromal differentiation program even in the absence ovarian E in an ovariectomized, progesterone-supplemented pregnant mouse model. Administration of letrozole, a specific aromatase inhibitor, to these mice blocked the stromal differentiation process. Gene expression profiling further revealed that the intrauterine E induces the expression of several stromal factors that promote neovascularization in the decidual tissue. Collectively, these studies identified the decidual uterus as a novel site of E biosynthesis and uncovered E-regulated maternal signaling pathways that critically control uterine differentiation and angiogenesis during early pregnancy.