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Cellular hierarchies and signals that govern stemness and differentiation of intestinal adenoma cells are not well defined. In this study, we used organotypic culture to investigate the impact of β-catenin and BMP signals in cells that form intestinal adenoma in the mouse. We found that activation of β-catenin signaling by loss of APC or transgenic induction of oncogenic mutant β-catenin (Ctnnb1mut) initiates the conversion of untransformed intestinal cells to tumor cells. These tumor cells display cancer stem cell (CSC) traits such as increased expression of the CSC markersCd133andCd44, a high capacity for self-renewal and unlimited proliferative potential. Subsequent inactivation of transgenicCtnnb1mut results in the reversion of tumor cells to normal intestinal stem cells, which immediately reinstall the cellular hierarchy of the normal intestinal epithelium. Our data demonstrate that oncogenic activation of β-catenin signaling initiates the early steps of intestinal cellular transformation in the absence of irreversible genetic or epigenetic changes. Interestingly, we found that tumor cells in culture and in adenoma produce BMP4, which counteracts CSC-like traits by initiating irreversible cellular differentiation and loss of self-renewal capacity. We conclude that the opposition of stemness-maintaining oncogenic β-catenin signals and autocrine differentiating BMP signals within the adenoma cell provides a rationale for the formation of cellular hierarchies in intestinal adenoma and may serve to limit adenoma growth.