A woman's risk of breast cancer is strongly affected by her reproductive history. The hormonal milieu is also a key determinant of the course of the disease. Combining mouse genetics with tissue recombination techniques, we have established that the female reproductive hormones, estrogens, progesterone, and prolactin, act sequentially on the mammary epithelium to trigger distinct developmental steps. The hormones impinge directly on a subset of luminal mammary epithelial cells that express the respective hormone receptors and act as sensor cells translating and amplifying systemic signals into local stimuli. Local signaling is stage and age specific. During puberty, estrogens promote proliferation using the EGF family member, amphiregulin, as essential paracrine mediator. In adulthood, progesterone, rather than estrogen, is the major inducer of stem cell activation and cell proliferation of the mammary epithelium. Hormonal signaling modulates crucial developmental pathways that impinge on mammary stem cell populations, while Notch signaling, by inhibiting p63, is central to mammary cell fate determination. Cell proliferation occurs in two waves. The first results from direct stimulation of the small fraction of hormone receptor positive cells. It is followed by a second wave of progesterone-induced proliferation involving mostly hormone receptor negative cells, in which RANKL is a key mediator. A model in which repeated activation of paracrine signaling by progesterone with resulting stem cell activation promotes breast carcinogenesis is proposed.