Embryo implantation is regulated by a variety of endometrial factors, including cytokines, growth factors, and transcription factors. Earlier studies identified the leukemia inhibitory factor (LIF), a cytokine produced by uterine glands, as an essential regulator of implantation. LIF, acting via its cell surface receptor, activates the signal transducer and activator of transcription 3 (STAT3) in the uterine epithelial cells. However, the precise mechanism via which activated STAT3 promotes uterine function during implantation remains unknown. To identify the molecular pathways regulated by STAT3, we created SW^d/d mice in which Stat3 gene is conditionally inactivated in uterine epithelium. The SW^d/d mice are infertile due to a lack of embryo attachment to the uterine luminal epithelium and consequent implantation failure. Gene expression profiling of uterine epithelial cells of SW^d/d mice revealed dysregulated expression of specific components of junctional complexes, including E-cadherin, α- and β-catenin, and several claudins, which critically regulate epithelial junctional integrity and embryo attachment. In addition, uteri of SW^d/d mice exhibited markedly reduced stromal proliferation and differentiation, indicating that epithelial STAT3 controls stromal function via a paracrine mechanism. The stromal defect arose from a drastic reduction in the production of several members of the epidermal growth factor family in luminal epithelium of SW^d/d uteri and the resulting lack of activation of epidermal growth factor receptor signaling and mitotic activity in the stromal cells. Collectively, our results uncovered an intricate molecular network operating downstream of STAT3 that regulates uterine epithelial junctional reorganization, and stromal proliferation, and differentiation, which are critical determinants of successful implantation.