c Xbp1, a key mediator of the unfolded protein response (UPR), is activated by IRE1␣-mediated splicing, which results in a frameshift to encode a protein with transcriptional activity. However, the direct function of Xbp1 in epithelial cells during mammary gland development is unknown. Here we report that the loss of Xbp1 in the mammary epithelium through targeted deletion leads to poor branching morphogenesis, impaired terminal end bud formation, and spontaneous stromal fibrosis during the adult virgin period. Additionally, epithelial Xbp1 deletion induces endoplasmic reticulum (ER) stress in the epithelium and dramatically inhibits epithelial proliferation and differentiation during lactation. The synthesis of milk and its major components, ␣/-casein and whey acidic protein (WAP), is significantly reduced due to decreased prolactin receptor (Prlr) and ErbB4 expression in Xbp1-deficient mammary epithelium. Reduction of Prlr and ErbB4 expression and their diminished availability at the cell surface lead to reduced phosphorylated Stat5, an essential regulator of cell proliferation and differentiation during lactation. As a result, lactating mammary glands in these mice produce less milk protein, leading to poor pup growth and postnatal death. These findings suggest that the loss of Xbp1 induces a terminal UPR which blocks proliferation and differentiation during mammary gland development.T he primary function of the mammary gland is to provide nutrition for newborns through production of milk protein and lipids (1). These milk proteins are synthesized in the endoplasmic reticulum (ER) and are secreted into the mammary duct as classical secretory proteins (2). The mammary gland undergoes dramatic, continual developmental changes throughout adulthood and provides a valuable model through which to track the interplay between secretory pathway competence and epithelial cell maturation during postnatal development (3). Development of the mammary gland is governed by hormonal stimuli, which include the prolactin/ErbB4/Stat5 signaling axis (4-8). During pregnancy the mammary epithelium grows and branches until midpregnancy and differentiates functionally during late pregnancy and the early postpartum period. This epithelial differentiation is accompanied by the expression of milk protein genes, such as whey acidic protein (WAP) and ␣/-casein, and by the production of milk droplets (6).The ER has a crucial role in quality control during the folding and secretion of secretory proteins. The accumulation of misfolded proteins in the ER provokes ER stress by increasing the demand for energy, chaperones, and other proteins that are needed to fold client proteins or to degrade unfoldable secretory cargo. This stress activates a signaling network called the unfolded protein response (UPR). The UPR increases the folding capacity of the secretory pathway through the transcription and the upregulation of ER chaperones and foldases and the ER quality control machinery. Xbp1 is one master regulator of the UPR. It is produced as an...