Areas of a junction between two types of epithelia are known to be cancer-prone in many organ systems. In some cases, this is attributed to stem cell niches located in such areas. However, mechanisms responsible for the preferential malignant transformation of cells at the junction areas, as compared to their counterparts in other regions of the same organ systems, remain insufficiently elucidated. Here we report that inactivation of tumor suppressor genes Trp53 and Rb1 in the gastric epithelium derived from Lgr5+ stem cells results in preferential formation of metastatic poorly differentiated neoplasms, which are similar to human gastroesophageal junction (GEJ) carcinoma. Mouse carcinomas arise from the gastric squamous- columnar junction (SCJ), in spite of predominant presence of Lgr5+ cells in the antrum. Unlike antral cells, SCJ cells comprise a highly proliferative pool of immature cancer-prone Lgr5-CD44+ cells. These cells express CD44 ligand osteopontin (OPN), which promotes organoid formation ability, stemness and tumorigenicity of gastric cells. OPN expression is downregulated in Lgr5+ cells due to repression of the OPN encoding gene Spp1 by a downstream effector of WNT signaling TCF-4. Supporting the key role of OPN-CD44 signaling in carcinogenesis, Lgr5 expression attenuates tumor growth and no Lgr5+ neoplastic cells are present in mouse and human SCJ carcinomas. In sum, OPN-responsive immature Lgr5-CD44+ cells represent the most susceptible target for the malignant transformation. Since OPN and CD44 overexpression correlate with the worst prognosis of human GEJ carcinoma, detection and selective targeting of active OPN-CD44 pathway may have direct clinical relevance.