Recent observations that aberrant expression of tissue transglutaminase (TG2) promotes growth, survival, and metastasis of multiple tumor types is of great significance and could yield novel therapeutic targets for improved patient outcomes. To accomplish this, a clear understanding of how TG2 contributes to these phenotypes is essential. Using mammary epithelial cell lines (MCF10A, MCF12A, MCF7 and MCF7/RT) as a model system, we determined the impact of TG2 expression on cell growth, cell survival, invasion, and differentiation. Our results show that TG2 expression promotes drug resistance and invasive functions by inducing epithelial-mesenchymal transition (EMT). Thus, TG2 expression supported anchorage-independent growth of mammary epithelial cells in soft-agar, disrupted the apical-basal polarity, and resulted in disorganized acini structures when grown in 3D-culture. At molecular level, TG2 expression resulted in loss of E-cadherin and increased the expression of various transcriptional repressors (Snail1, Zeb1, Zeb2 and Twist1). Tumor growth factor-beta (TGF-β) failed to induce EMT in cells lacking TG2 expression, suggesting that TG2 is a downstream effector of TGF-β-induced EMT. Moreover, TG2 expression induced stem cell-like phenotype in mammary epithelial cells as revealed by enrichment of CD44(+)/CD24(-/low) cell populations. Overall, our studies show that aberrant expression of TG2 is sufficient for inducing EMT in epithelial cells and establish a strong link between TG2 expression and progression of metastatic breast disease.