In response to chemical stimuli from cancer cells, mesenchymal stem cells (MSC) can differentiate into cancer-associated fibroblasts (CAF) and promote tumor progression. How mechanical stimuli such as stiffness of the extracellular matrix (ECM) contribute to MSC phenotype in cancer remains poorly understood. Here, we show that ECM stiffness leads to mechano-signal transduction in MSC, which promotes mammary tumor growth in part through secretion of the signaling protein prosaposin. On a stiff matrix, MSC cultured with conditioned media from mammary cancer cells expressed increased levels of α-smooth muscle actin, a marker of CAF, compared with MSC cultured on a soft matrix. By contrast, MSC cultured on a stiff matrix secreted prosaposin that promoted proliferation and survival of mammary carcinoma cells but inhibited metastasis. Our findings suggest that in addition to chemical stimuli, increased stiffness of the ECM in the tumor microenvironment induces differentiation of MSC to CAF, triggering enhanced proliferation and survival of mammary cancer cells.