Interactions between cancer cells and the tissue microenvironment play an essential role in controlling tumor development and progression. Here, we report that stromal modulation induced by a biodegradable meshwork (Hyalograft 3D) inhibited tumor vascularization and invasion of the locally invasive low-grade malignant human HaCaT-ras II-4 keratinocytes in a surface xenotransplantation assay. The scaffold caused formation of an active granulation tissue that shifted to a fibrotic-type connective tissue with accumulation of myofibroblasts and collagen bundles. Most importantly, in transplants with scaffolds, the epithelial-stromal border was normalized developing an ultrastructurally complete basement membrane (BM) including hemidesmosomes. The observed reversion of the tumor phenotype was not due to decreased tumor cell proliferation but correlated with (i) normalization of epidermal differentiation, (ii) condensation of extracellular matrix (ECM) and (iii) reduction of peritumoral protease activity Furthermore, inhibited invasion was paralleled by eliminated tumor vascularization. This was substantiated by a diminished endothelial VEGF-receptor (VEGFR) expression and, in turn, by a concomitant increase in the ECM components thrombospondin-1 (TSP-1) and endostatin, known to impair angiogenesis. Even in transplants of the metastatic high-grade malignant HaCaT-ras A-5RT3 keratinocytes the anti-invasive effect of the scaffold-modulated stroma prevailed. Tumor vascularization and invasion was reduced and the epithelial tissue partially normalized including formation of stretches of BM. This clearly demonstrates that the scaffold-modulated connective tissue not only blocks tumor invasion but reverts the tumor phenotype. These novel findings underline the controlling function of tumor stroma and open new strategies of cancer therapy by targeting tumor stroma elements.