IGF-I mediates mammary ductal development through stimulation of terminal end bud (TEB) development; however, no published data exist on the mechanism through which this occurs. The mechanism of IGF-I action on the TEB was studied by determining the requirement for the IGF-I receptor (IGF-IR) in IGF-I-dependent ductal development. We hypothesized that loss of the IGF-IR would disrupt mammary ductal development through a combination of decreased proliferation or increased apoptosis. Because IGF-IR null mice die at birth, embryonic mammary gland transplantation was used to study the effects of a disrupted IGF-IR gene. Analyses of grafts after 4 or 8 wk of development demonstrated a limited growth potential of the null mammary epithelium in virgin hosts. Bromodeoxyuridine labeling and terminal deoxynucleotidyltransferase-mediated deoxy-UTP nick-end labeling showed that cell proliferation was significantly decreased in null TEBs, but apoptosis was not. In addition, both the size and number of TEBs were reduced in null outgrowths. In pregnant hosts, null ductal growth was stimulated beyond the level seen in virgin hosts. These findings directly establish a proliferation-dependent role for the IGF-IR in the cells of the TEB. Additionally, this study indicates that pregnancy-dependent compensatory mechanisms can stimulate mammary development in the absence of an IGF-IR.