The steroid hormone, estradiol, is essential for both the growth of normal breast and induction of mammary carcinomas. The growth promoting effects of estrogen are presumed to be mediated by growth factors, in particular, epidermal growth factor, which mediates its effects through erbB receptors, erbB1 and erbB2/C-neu. C-neu is amplified and over-expressed in a large number of human cancers and transgenic mice over-expressing C-neu also develop mammary tumors. However, as yet, the impact of C-neu over-expression on estrogen action during normal mammary development and hence, its precise role in carcinogenesis, remains unclear. In the present studies, we demonstrate that estradiol-dependent mammary ductal growth accompanying puberty is impaired in transgenic mice expressing wild type Cneu, and is intrinsic to the tissue. The impairment is not due to an overall impairment in estrogen action, since progesterone receptor expression is unaffected in C-neu mice. It is also not due to an intrinsic inability of the epithelial cells to proliferate, since impeded ductal growth co-exists with alveolar growth during pregnancy. Therefore, we propose that, depending on the physiological state, C-neu may either promote or inhibit the growth of mammary epithelial cells, and discuss its potential significance to carcinogenesis.