Cancer-associated fibroblasts (CAFs) are key regulators of tumorigenesis and promising targets for next-generation therapies. We discovered that cancer cell-derived activin A reprograms fibroblasts into pro-tumorigenic CAFs. Mechanistically, this occurs via Smad2-mediated transcriptional regulation of the formin mDia2, which directly promotes filopodia formation and cell migration. mDia2 also induces expression of CAF marker genes through prevention of p53 nuclear accumulation, resulting in the production of a pro-tumorigenic matrisome and secretome. The translational relevance of this finding is reflected by activin A overexpression in tumor cells and of mDia2 in the stroma of skin cancer and other malignancies and the correlation of high activin A/mDia2 levels with poor patient survival. Blockade of this signaling axis using inhibitors of activin, activin receptors or mDia2 suppressed cancer cell malignancy and squamous carcinogenesis in 3D organotypic cultures, ex vivo, and in vivo, providing a rational for pharmacological inhibition of activin A-mDia2 signaling in stratified cancer patients.