Inflammation is a risk factor for prostate cancer, but the mechanisms by which inflammation increases that risk are poorly understood. Here, we demonstrate that low expression of CD38 identifies a progenitor-like subset of luminal cells in the human prostate. CD38^lo luminal cells are enriched in glands adjacent to inflammatory cells and exhibit epithelial nuclear factor κB (NF-κB) signaling. In response to oncogenic transformation, CD38^lo luminal cells can initiate human prostate cancer in an in vivo tissue-regeneration assay. Finally, the CD38^lo luminal phenotype and gene signature are associated with disease progression and poor outcome in prostate cancer. Our results suggest that prostate inflammation expands the pool of progenitor-like target cells susceptible to tumorigenesis.