Neovascularization is critical for tumor growth and development. The cellular mediators for this process are yet to be defined. We discovered that bone marrow-derived endothelial progenitor cells (BM-EPC), having the phenotype (CD133+, CD34+, VEGFR-2+), initiate neovascularization in response to TG1-1 mammary cells implanted in the inguinal mammary gland of Tie-2 GFP transgenic mice. The fluorescence tag allowed for tracing the migration of green fluorescent protein-tagged endothelial progenitor cells to tumor tissues. We discovered that 17-beta estradiol supplementation of ovariectomized mice significantly enhanced BM-EPC-induced neovascularization and secretion of angiogenic factors within the tumor microenvironment. Cell-based system analyses showed that estrogen-stimulated BM-EPCs secreted paracrine factors which enhanced TG1-1 cell proliferation and migration. Furthermore, TG1-1 cell medium supplemented with estrogen-induced BM-EPC mediated tubulogenesis, which was an experimental in vivo representation of the neovasculature. Our data provide evidence of BM-EPC mammary tumor cell interactions and identify a novel cellular mediator of tumor progression that can be exploited clinically.