In homeostasis, counterbalanced morphogen signalling gradients along the vertical axis of the intestinal mucosa regulate the fate and function of epithelial and stromal cell compartments. Here, we used a disease-positioned mouse, and human tissue, to explore the consequences of pathological BMP signalling dysregulation on epithelial-mesenchymal interaction. Aberrant pan-epithelial expression of the secreted BMP antagonist Grem1, resulted in ectopic crypt formation with lineage tracing demonstrating the presence of Lgr5(-) stem/progenitor cells. Isolated epithelial cell Grem1 expression had no effect on individual cell fate indicating an intercompartmental impact of mucosal-wide BMP antagonism. Treatment with a novel anti-Grem1 antibody abrogated the polyposis phenotype, and triangulation of specific pathway inhibitors defined a pathological sequence of events, with wnt-ligand dependent ectopic stem cell niches formed through stromal remodelling following BMP disruption. These data support an emerging co-evolutionary model of intestinal cell compartmentalisation based on bidirectional regulation of epithelial-mesenchymal cell fate and function.