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Abstract Chronic prostate inflammation in patients with benign prostate hyperplasia (BPH) correlates with the severity of symptoms. How inflammation contributes to prostate enlargement and/or BPH symptoms and the underlying mechanisms remain unclear. In this study, we utilize a unique transgenic mouse model that mimics chronic non-bacterial prostatitis in men and investigate the impact of inflammation on androgen receptor (AR) in basal prostate stem cells (bPSC) and their differentiation in vivo. We find that inflammation significantly enhances AR levels and activity in bPSC. More importantly, we identify interleukin 1 receptor antagonist (IL-1RA) as a crucial regulator of AR in bPSC during inflammation. IL-1RA is one of the top molecules upregulated by inflammation, and inhibiting IL-1RA reverses the enhanced AR activity in organoids derived from inflamed bPSC. Additionally, IL-1RA appears to activate AR by counteracting IL-1α's inhibitory effect. Furthermore, using a lineage tracing model, we observe that inflammation induces bPSC proliferation and differentiation into luminal cells even under castrate conditions, indicating that AR activation driven by inflammation is sufficient to promote bPSC proliferation and differentiation. Taken together, our study uncovers mechanisms through which inflammation modulates AR signaling in bPSC and induces bPSC luminal differentiation that may contribute to prostate hyperplasia.