Transforming growth factor (TGF)-beta1 and TGF-beta3 are normally expressed at high levels in the mammary gland during quiescence and at all stages of development, except lactation. Exogenously added TGF-beta1,-beta2, and-beta3 have been shown to regulate growth and differentiation of mammary epithelial cells in vitro and in vivo. TGF-betas signal through a heteromeric complex of type I and type II serine/threonine kinases. The type II receptor is necessary for ligand binding and growth suppression by TGF-betas. Deletions of the cytoplasmic domains of several kinase receptors known to function in multimeric complexes have been shown to act as dominant-negative mutations. To evaluate the role of endogenous TGF-betas in the growth and differentiation of the mammary gland in vivo, we have targeted expression of a truncated, kinase-defective TGF-beta type II receptor to mammary epithelial cells in transgenic mice using the mouse mammary tumor virus promoter/enhancer. Transgene expression was localized to the epithelial cells of terminal ducts and alveolar buds. At approximately 20 weeks of age, virgin female transgenic mice demonstrated varying degrees of mammary epithelial hyperplasia. Mammary glands from transgenic, virgin animals exhibited alveolar development and expression of the milk protein, beta-casein. The data suggest that impaired responsiveness in the epithelium to endogenous TGF-betas results in inappropriate alveolar development and differentiation in the mammary gland. We conclude that endogenous TGF-betas signal to the epithelium to maintain quiescence in the mammary glands of virgin animals.