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The activation and differentiation of cancer-associated fibroblasts (CAF) are involved in tumor progression. Here, we show that the tumor-promoting lipid mediator prostaglandin E2 (PGE2) plays a paradoxical role in CAF activation and tumor progression. Restricting PGE2 signaling via knockout of microsomal prostaglandin E synthase-1 (mPGES-1) in PyMT mice or of the prostanoid E receptor 3 (EP3) in CAFs stunted mammary carcinoma growth associated with strong CAF proliferation. CAF proliferation upon EP3 inhibition required p38 MAPK signaling. Mechanistically, TGFβ–activated kinase-like protein (TAK1L), which was identified as a negative regulator of p38 MAPK activation, was decreased following ablation of mPGES-1 or EP3. In contrast with its effects on primary tumor growth, disruption of PGE2 signaling in CAFs induced epithelial-to-mesenchymal transition in cancer organoids and promoted metastasis in mice. Moreover, TAK1L expression in CAFs was associated with decreased CAF activation, reduced metastasis, and prolonged survival in human breast cancer. These data characterize a new pathway of regulating inflammatory CAF activation, which affects breast cancer progression.