The transcription factor, CCAAT/enhancer binding protein beta (C/EBPbeta), regulates the expression of genes involved in proliferation and terminal differentiation. Dimerization of the dominant-negative C/EBPbeta-liver-enriched inhibitory protein (LIP) isoform with the C/EBPbeta-liver-enriched activating protein (LAP) isoform inhibits the transcriptional activation of genes involved in differentiation. Consequently, an increase in LIP levels may inhibit terminal differentiation and lead to proliferation. C/EBPbeta-LIP and LAP are crucial for mammary gland development (G. W. Robinson et al., Genes Dev., 12: 1907-1916, 1998; T. N. Seagroves et al., Genes Dev., 12: 1917-1928, 1998) and are also overexpressed in breast cancer (B. Raught et al., Cancer Res., 56: 4382-4386. 1996; C. A. Zahnow et al., J. Natl. Cancer Inst., 89: 1887-1891, 1997); however, little is known about how these isoforms differentially regulate cell cycle progression. To address this question, C/EBPbeta-LIP was overexpressed in both the mammary glands of transgenic mice and in cultured TM3 mammary epithelial cells. Here we report that the involuted mammary glands from transgenic mice overexpressing C/EBPbeta-LIP contain both focal and diffuse alveolar hyperplasia and, less frequently, contain mammary intraepithelial neoplasias (high grade) and invasive and noninvasive carcinomas. Likewise, cultured TM3 cells, stably expressing C/EBPbeta-LIP, showed an increase in proliferation and foci formation attributable to a reentry into S-phase during cellular confluence. These results demonstrate that C/EBPbeta-LIP can induce epithelial proliferation and the formation of mammary hyperplasias and suggest that a C/EBPbeta-LIP-initiated growth cascade may be susceptible to additional oncogenic hits, which could result in the initiation and progression of neoplasia.