Psoriasin (S100A7), a member of the S100 family of calcium-binding proteins, is highly expressed in high-grade ductal carcinoma in situ (DCIS) and in the benign hyperproliferative skin disorder psoriasis. The gene that encodes psoriasin and many other S100 genes are located within a gene cluster on chromosome region 1q21, known as the epidermal differentiation complex. This cluster contains genes for several differentiation markers that play important roles in the terminal differentiation of the epidermis. The purpose of the present study was to evaluate the role of psoriasin in the differentiation process of mammary epithelial cells. Normal mammary epithelial cells (MCF10A) cultured in confluence and suspension, conditions known to induce psoriasin expression, demonstrated a shift towards a more differentiated phenotype indicated by an increase in the expression of the luminal differentiation markers CD24 and MUC1 and the reduced expression of the breast stem cell marker CD44. The expression of psoriasin and MUC1 was most pronounced in the CD24(+)-enriched fraction of confluent MCF10A cells. The shift towards a more differentiated phenotype was abolished upon the downregulation of psoriasin using short hairpin RNA (shRNA) and small interfering RNA (siRNA). Using specific inhibitors, we showed that psoriasin and CD24 expression was regulated by reactive oxygen species (ROS) and the nuclear factor (NF)-κB signaling pathways. While immunohistochemical analyses of DCIS showed heterogeneity, the expression of psoriasin and CD24 showed a similar staining pattern. Our findings suggest that the expression of psoriasin is linked to the luminal differentiation marker CD24 in mammary epithelial cells. Psoriasin demonstrated an essential role in the shift towards a more differentiated CD24(+) phenotype, supporting the hypothesis that psoriasin plays a role in the differentiation of luminal mammary epithelial cells.