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Background: Stepwise acquisition of oncogene mutations and deletion/inactivation of tumor suppressor genes characterize the development of colorectal cancer (CRC). These genetic events interact with discrete morphologic transitions from hyperplastic mucosa to adenomatous areas, followed by in situ malignant transformation and finally invasive carcinoma. The goal of this study was to identify tissue markers of the adenoma-carcinoma morphogenetic transitions in CRC. Methods and Findings: We analyzed the patterns of expression of growth regulatory and stem cell markers across these distinct morphologic transition zones in 735 primary CRC tumors. In 202 cases with preserved adenoma-adenocarcinoma transition, we identified, in 37.1% of cases, a zone of adenomatous epithelium, located immediately adjacent to the invasive component, that showed rapidly alternating intraglandular stretches of PTEN+ and PTEN- epithelium. This zone exactly overlapped with similar alternating expression of Ki-67 and inversely with the transforming growth factor-beta (TGF-β) growth regulator SMAD4. These zones also show parallel alternating levels and/or subcellular localization of multiple cancer stem/progenitor cell (CSC) markers, including β-catenin/CTNNB1, ALDH1, and CD44. PTEN was always re-expressed in the invasive tumor in these cases, unlike those with complete loss of PTEN expression. Genomic microarray analysis of CRC with prominent CSC-like expansions demonstrated a high frequency of PTEN genomic deletion/haploinsufficiency in tumors with CSC-like transition zones (62.5%) but not in tumors with downregulated but non-alternating PTEN expression (14.3%). There were no significant differences in the levels of KRAS mutation or CTNNB1 mutation in CSC-like tumors as compared to unselected CRC cases. Conclusions: In conclusion, we have identified a distinctive CSC-like pre-invasive transition zone in PTEN-haploinsufficient CRC that shows convergent on-off regulation of the PTEN/AKT, TGF-β/SMAD and Wnt/β-catenin pathways. This bottleneck-like zone is usually followed by the emergence of invasive tumors with intact PTEN expression but dysregulated TP53 and uniformly high proliferation rates. [ABSTRACT FROM AUTHOR]