The bZIP transcription factor C/EBP beta is important for mammary gland development and its expression is deregulated in human breast cancer. To determine whether C/EBP beta regulates mammary stem cells (MaSCs), we employed two different knockout strategies. Using both a germline and a conditional knockout strategy, we demonstrate that mammosphere formation was significantly decreased in C/EBP beta-deficient mammary epithelial cells (MECs). Functional limiting dilution transplantation assays indicated that the repopulating ability of C/EBP beta-deleted MECs was severely impaired. Serial transplantation experiments demonstrated that C/EBP beta deletion resulted in decreased outgrowth potential and premature MaSC senescence. In accord, fluorescence-activated cell sorting analysis demonstrated that C/EBP beta-null MECs contained fewer MaSCs, the loss of luminal progenitors and an increase in differentiated luminal cells as compared with wild-type. Gene profiling of C/EBP beta-null stem cells revealed an alteration in cell fate specification, exemplified by the expression of basal markers in the luminal compartment. Thus, C/EBP beta is a critical regulator of both MaSC repopulation activity and luminal cell lineage commitment. These findings have critical implications for understanding both stem cell biology and the etiology of different breast cancer subtypes.