The progesterone receptor (PR) plays a pivotal role in proper development and function of the mammary gland and has also been implicated in mammary tumorigenesis. PR is a ligand-activated transcription factor; however, relatively, little is known about its mechanisms of action at endogenous target promoters. The aim of our study was to identify a natural PR-responsive gene and investigate its transcriptional regulation in the mammary microenvironment. Our experiments revealed FKBP5 as a direct target of the PR, because it exhibited a rapid activation by progestin that was cycloheximide independent and correlated with recruitment of RNA polymerase II to the promoter. Site-directed mutagenesis and chromatin immunoprecipitation assays showed that progestin responsiveness is mediated through a composite element in the first intron, to which the PR binds concomitantly with GATA-2. Mutational analysis of the element revealed that the GATA-2 site is essential for progestin activation. Direct binding of PR to DNA contributes to the efficiency of activation but is not sufficient, suggesting that the receptor makes important protein-protein interactions as part of its mechanism of action at the FKBP5 promoter. Using chromatin immunoprecipitation assays we also determined that the intronic region is in communication with the promoter, probably via DNA looping. Time course analysis revealed a cyclical pattern of PR recruitment to the FKBP5 gene but a persistent recruitment to the mouse mammary tumor virus promoter, indicating that receptor cycling is a gene-specific phenomenon rather than a characteristic of the receptor itself. Our study offers new insight in the nature of PR-regulated transcription in mammary cancer cells.