The ERBB2/HER2/NEU receptor tyrosine kinase gene is amplified in up to 30% of human breast cancers. The frequent and specific selection of this receptor kinase gene for amplification in breast cancer implies that it has important normal functions in the mammary gland. To investigate the functions of ErbB2 during normal mouse mammary gland development, we transplanted mammary buds from genetically rescued ErbB2(-/-) embryos that express ErbB2 in the cardiac muscle. ErbB2(-/-) mammary buds transplanted to a wild-type mammary fat pad support outgrowth of an epithelial tree that advances only slowly through the mammary fat pad at puberty. This penetration defect is associated with structural defects in terminal end buds, characterized by a decrease in body cell number, an increased presence of cap-like cells in the prelumenal compartment, and the presence of large luminal spaces. Lobuloalveolar development was not affected in glands that developed from ErbB2(-/-) transplanted tissue. The results may have implications for the aggressive phenotypes associated with ERBB2-overexpressing mammary carcinomas.