The CCAAT/enhancer binding proteins (C/EBPs) are differentially expressed throughout mammary gland development and interact with binding sites within the promoter of a milk protein gene, beta-casein. The specific roles of C/EBPbeta and C/EBPalpha in mouse mammary gland development and differentiation have been investigated in mice that carry targeted deletions of these genes. C/EBPbeta-/- virgin mice exhibited cystic, enlarged mammary ducts with decreased secondary branching. Transplantation of C/EBPbeta-/- mammary epithelium into the cleared mammary fat pads of nude mice confirmed that this defect in ductal morphogenesis was intrinsic to the epithelium. When treated with estrogen/progesterone (E+P) to simulate pregnancy, C/EBPbeta-/- mammary glands displayed only limited lobuloalveolar development and ductal side branching. Primary mammary epithelial cells obtained from E+P-treated C/EBPbeta-/- mice that were cultured on extracellular matrix gels did not functionally differentiate in response to lactogenic hormones despite their organization into three-dimensional structures. Expression of beta-casein protein was inhibited 85%-100% and whey acidic protein (WAP) was undetectable. In contrast, no detectable alterations in mammary development or beta-casein expression were observed in mammary outgrowths derived from newborn C/EBPalpha-/- mammary epithelium transplanted into the cleared mammary fat pads of syngeneic hosts. These results demonstrate that C/EBPbeta, but not C/EBPalpha, is required for ductal morphogenesis, lobuloalveolar development, and functional differentiation of mammary epithelial cells.