How breast diversity is generated is a fascinating and fundamental question with important clinical implications. It is clear that the diversity of phenotypes displayed by breast cancer cells reflects the array of cell types present in the disease-free breast epithelium, including luminal, basal and stem cells. Therefore, it is hypothesized that the molecular regulators governing normal development of the breast epithelium may double as engines of breast tumor diversity. In the past few years, a deepened understanding of the mammary epithelial hierarchy has prompted the search for the cellular precursors of breast tumors. At the same time, the use of novel experimental strategies including the new technology of massively parallel sequencing has provided insight into the origin and evolution of breast tumors. Here, we review the current understanding of the basis of the intrinsic subtypes and the sources of inter-tumor heterogeneity.