Mammary alveolar development during pregnancy is triggered by hormone signals. The prolactin receptor/Jak2/signal transducer and activator of transcription (Stat) 5 signal transduction pathway is the principal mediator of these cues and alveolar development is abrogated in its absence. The loss of the basic helix-loop-helix protein inhibitor of differentiation (Id)2 results in a similar defect. To investigate the role of Id2 in mammary epithelium, we performed structural and molecular analyses. Id2-null mammary epithelial cells were unable to form alveoli; the epithelial architecture was disorganized and dissimilar from early stages of alveologenesis in wild-type glands. The epithelial cells retained the ductal marker Na-K-Cl cotransporter (NKCC)1. Nuclear localization of Stat5a and down-regulation of NKCC1 was observed in some areas, indicating a limited response to pregnancy signals. The differentiation status of Id2-null tissue at term was further characterized with cDNA microarrays enriched in mammary specific sequences (mammochip). Some of the early differentiation markers for mammary epithelium were expressed in the Id2-null tissue, whereas genes that are expressed at later stages of pregnancy were not induced. From these results, we conclude that, in the absence of Id2, mammary epithelial development is arrested at an early stage of pregnancy.