INT3 is interrupted by retroviral DNA insertion in approximately 18% of primary Czech mouse mammary tumors induced by mouse mammary tumor virus. One consequence of these insertions is the production of a 2.4-kilobase, tumor-specific RNA transcript encoding the entire intracellular domain of the Int3 protein which is initiated from the 3' long terminal repeat promoter of the inserted viral genome. Female mice (FVB-3) transgenic for a genomic fragment comprised of this truncated region of INT3 express the 2.4-kilobase truncated INT3 transcript and exhibit focal mammary tumors at 100% penetrance. INT3 is a member of a family of genes, highly conserved through evolution and characterized by Drosophila melanogaster Notch and Caenorhabditis elegans lin-12, the function of which relates to cell fate determination. Upon transfection into the appropriate hosts, expression vectors of truncated Notch and lin-12, representing their respective cytoplasmic domains, have been demonstrated to effect their complete gene function with respect to cell fate determination. This suggests that the extracellular portion of these proteins function only to regulate activity. Reciprocal transplantation of transgenic FVB-3 and normal mammary tissue to the epithelium-divested fat pads of the respective donor females demonstrates that FVB-3 mammary epithelium is unable to grow and/or to functionally differentiate. However, normal epithelium grows and fully differentiates in transgenic FVB-3 fat pads, indicating that the dysfunction of FVB-3 mammary glands is due to a deficiency inherent in their epithelium. Electron microscopy reveals that transgenic INT3 epithelial cells do not form intercellular junctional complexes in the developing subadult mammary gland. The hormonal stimulation of pregnancy overcomes the deficiency for ductal growth so apparent in the virgin gland such that pregnant FVB-3 glands produce complete ductal systems. Nevertheless, during pregnancy, FVB-3 mammary cells fail to form secretory lobules and to produce milk. Examination of INT3 expression by immunocytochemistry and reverse transcriptase-PCR show that INT3 is expressed constitutively in mammary stroma and epithelia at all stages of postpubertal mammary evolution. These results indicate that deregulated expression of a truncated Int3 in mammary epithelial cells limits their capacity to perform the cell fate decisions required for morphogenesis and functional differentiation.