Cancer stem cells are thought to drive tumor growth and metastasis through their stemness properties, and are characterized by the ability to initiate tumor growth. Tumor initiation in vivo is strongly increased by coinjecting tumor cells with ECM components such as Matrigel, suggesting a critical role for the extracellular matrix microenvironment in determining stemness properties. Using gene expression profiling and subsequent validation, we found that melanoma cells grown in 3D ECM microenvironments such as Matrigel, laminin and collagen exhibited strongly increased expression of Id1 and Id3 in comparison to tumor cells cultivated on 2D surfaces. Id1 and Id3 are transcriptional regulators that are implicated in governing stemness properties, and play a key role in regulating the ability of tumor cells to initiate primary tumors and metastatic growth. Using loss of function approaches (treatment with noggin or inhibition of BMP receptor activation), we observed with a variety of melanoma and breast cancer cells that several types of 3D ECM microenvironment as well as artificial 3D matrices can induce Id1 and Id3 expression by promoting autocrine BMP signalling. Mechanistically, these and other data collectively suggest that 3D ECM microenvironments can act as a mechanical barrier that inhibits diffusion of endogenously produced BMP protein, thereby increasing local BMP concentrations. Subsequent autocrine BMP signalling leads to increased expression of Id1 and Id3, and modulates tumor cell properties associated with stemness. Compounds that target Id1/Id3 expression or function may therefore prove useful as effective cancer therapies.