The HER4 receptor tyrosine kinase and STAT5A cooperate to promote mammary luminal progenitor cell maturation and mammary epithelial cell differentiation. Coupled HER4 and STAT5A signaling is mediated, in part, through association of the HER4 intracellular domain (4ICD) with STAT5A at STAT5A target gene promoters where 4ICD functions as a STAT5A transcriptional coactivator. Despite an essential role for coupled 4ICD and STAT5A signaling in mammary gland development, the mechanistic basis of 4ICD and STAT5A cooperative signaling remains unexplored. Here we show for the first time that 4ICD and STAT5A directly interact through STAT5A recruitment and binding to HER4/4ICD residue Y984. Accordingly, altering the 4ICD Y984 to phenylalanine results in a dramatic reduction of STAT5A and 4ICD-Y984F interacting complexes coimmunoprecipitated with HER4 or STAT5A specific antibodies. We further show that disrupting the 4ICD and STAT5A interaction has an important physiological impact on mammary epithelial cell differentiation. HC11 mammary epithelial cells with stable expression of 4ICD undergo differentiation with significantly increased expression of the STAT5A target genes and differentiation markers β-casein and WAP. In contrast, HC11 cells stably expressing 4ICD-Y984F failed to undergo differentiation with basal expression levels of β-casein and WAP. Differentiation in this cell system was induced in the absence of exogenous prolactin indicating that 4ICD activity is sufficient to induce mammary epithelial cell differentiation. Finally, we show that suppression of STAT5A expression abolishes the ability of 4ICD to induce HC11 differentiation and activate β-casein or WAP expression. Taken together our results demonstrate for the first time that direct coupling of 4ICD and STAT5A is both necessary and sufficient to drive mammary epithelial differentiation. In conclusion, our findings that 4ICD and STAT5A directly interact to form a physiologically important transcriptional activation complex, provide a mechanistic basis for the observations that HER4/4ICD and STAT5A cooperate to promote mammary gland progenitor cell maturation and initiate lactation at parturition.