Tumor susceptibility gene 101 (Tsg101) was identified in a random mutagenesis screen for potential tumor suppressors in NIH 3T3 cells. Altered transcripts of this gene have been detected in sporadic breast cancers and many other human malignancies. However, the involvement of this gene in neoplastic transformation and tumorigenesis is still elusive. Using gene targeting, we generated genetically engineered mice with a floxed allele of Tsg101. We investigated essential functions of this gene in vivo and examined whether the loss of function of Tsg101 results in tumorigenesis. Conventional knockout mice were generated through Cre-mediated excision of the first coding exon in the germ line of mouse mammary tumor virus (MMTV)-Cre transgenic mice. The complete ablation of Tsg101 in the developing embryo resulted in death around implantation. In contrast, mammary gland-specific knockout mice developed normally but were unable to nurse their young as a result of impaired mammogenesis during late pregnancy. Neither heterozygous null mutants nor somatic knockout mice developed mammary tumors after a latency of 2 years. The Cre-mediated deletion of Tsg101 in primary cells demonstrated that this gene is essential for the growth, proliferation, and survival of mammary epithelial cells. In summary, our results suggest that Tsg101 is required for normal cell function of embryonic and adult tissues but that this gene is not a tumor suppressor for sporadic forms of breast cancer.