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Progesterone action normally mediates the balance between anti-inflammatory and proinflammatory processes throughout the female reproductive tract. However, in women with endometriosis, endometrial progesterone resistance, characterized by alterations in progesterone responsive gene and protein expression, is now considered a central element in disease pathophysiology. Recent studies additionally suggest that the peritoneal microenvironment of endometriosis patients exhibits altered physiological characteristics that may further promote inflammation-driven disease development and progression. Within this review, we summarize our current understanding of the pathogenesis of endometriosis with an emphasis on the role that inflammation plays in generating not only the progesterone-resistant eutopic endometrium but also a peritoneal microenvironment that may contribute significantly to disease establishment. Viewing endometriosis from the emerging perspective that a progesterone resistant endometrium and an immunologically compromised peritoneal microenvironment are biologically linked risk factors for disease development provides a novel mechanistic framework to identify new therapeutic targets for appropriate medical management.