The mammary gland epithelium comprises two major cell types: basal and luminal. Basal cells interact directly with the extracellular matrix (ECM) and express higher levels of the ECM receptors, integrins, than luminal cells. We show that deletion of β1 integrin from basal cells abolishes the regenerative potential of the mammary epithelium and affects mammary gland development. The mutant epithelium was characterized by an abnormal ductal branching pattern and aberrant morphogenesis in pregnancy, although at the end of gestation, the secretory alveoli developed from β1 integrin-positive progenitors. Lack of β1 integrin altered the orientation of the basal-cell division axis and in mutant epithelium, in contrast to control tissue, the progeny of β1 integrin-null basal cells, identified by a genetic marker, was found in the luminal compartment. These results reveal, for the first time, the essential role of the basal mammary epithelial cell–ECM interactions mediated by β1 integrins in the maintenance of a functional stem cell population, mammary morphogenesis and segregation of the two major mammary cell lineages.