In the past forty years, the WNT/CTNNB1 signaling pathway has emerged as a key player in mammary gland development and homeostasis. While also evidently involved in breast cancer, much unclarity continues to surround its precise role in mammary tumor formation and progression. This is largely due to the fact that the specific and direct effects of hyperactive WNT/CTNNB1 signaling on the mammary epithelium remain unknown. Here we use a primary mouse mammary organoid culture system to close this fundamental knowledge gap. We show that hyperactive WNT/CTNNB1 signaling induces competing cell proliferation and differentiation responses. While proliferation is dominant at lower levels of WNT/CTNNB1 signaling activity, higher levels cause reprogramming towards an epidermal cell fate. We show that this involves de novo activation of the epidermal differentiation cluster (EDC) locus and we identify master regulatory transcription factors that likely control the process. This is the first time that the molecular and cellular dose-response effects of WNT/CTNNB1 signaling in the mammary epithelium have been dissected in such detail. Our analyses reveal that the mammary epithelium is exquisitely sensitive to small changes in WNT/CTNNB1 signaling and offer a mechanistic explanation for the squamous differentiation that is observed in some WNT/CTNNB1 driven tumors.