Inflammation is linked clinically and epidemiologically to cancer, and NF-kappaB appears to play a causative role, but the mechanisms are poorly understood. We show that transient activation of Src oncoprotein can mediate an epigenetic switch from immortalized breast cells to a stably transformed line that forms self-renewing mammospheres that contain cancer stem cells. Src activation triggers an inflammatory response mediated by NF-kappaB that directly activates Lin28 transcription and rapidly reduces let-7 microRNA levels. Let-7 directly inhibits IL6 expression, resulting in higher levels of IL6 than achieved by NF-kappaB activation. IL6-mediated activation of the STAT3 transcription factor is necessary for transformation, and IL6 activates NF-kappaB, thereby completing a positive feedback loop. This regulatory circuit operates in other cancer cells lines, and its transcriptional signature is found in human cancer tissues. Thus, inflammation activates a positive feedback loop that maintains the epigenetic transformed state for many generations in the absence of the inducing signal.