In the normal mammary gland, the basal epithelium is known to be bipotent and can generate either basal or luminal cells, whereas the luminal epithelium has not been demonstrated to contribute to the basal compartment in an intact and normally developed mammary gland. It is not clear whether cellular heterogeneity within a breast tumor results from transformation of bipotent basal cells or from transformation and subsequent basal conversion of the more differentiated luminal cells. Here we used a retroviral vector to express an oncogene specifically in a small number of the mammary luminal epithelial cells and tested their potential to produce basal cells during tumorigenesis. This in-vivo lineage-tracing work demonstrates that luminal cells are capable of producing basal cells on activation of either polyoma middle T antigen or ErbB2 signaling. These findings reveal the plasticity of the luminal compartment during tumorigenesis and provide an explanation for cellular heterogeneity within a cancer.