Agr2 is a putative protein disulfide isomerase (PDI) initially identified as an estrogen-responsive gene in breast cancer cell lines. While Agr2 expression in breast cancer is positively correlated with estrogen receptor (ER) expression, it is upregulated in both hormone dependent and independent carcinomas. Several in vitro and xenograft studies have implicated Agr2 in different oncogenic features of breast cancer; however, the physiological role of Agr2 in normal mammary gland development remains to be defined. Agr2 expression is developmentally regulated in the mammary gland, with maximum expression during late pregnancy and lactation. Using a mammary gland specific knockout mouse model, we show that Agr2 facilitates normal lobuloalveolar development by regulating mammary epithelial cell proliferation; we found no effects on apoptosis in Agr2−/− mammary epithelial cells. Consequently, mammary glands of Agr2−/− females exhibit reduced expression of milk proteins, and by two weeks post-partum their pups are smaller in size. Utilizing a conditional mouse model, we show that Agr2 constitutive expression drives precocious lobuloalveolar development and increased milk protein expression in the virgin mammary gland. In vitro studies using knock down and overexpression strategies in estrogen receptor positive and negative mammary epithelial cell lines demonstrate a role for Agr2 in estradiol-induced cell proliferation. In conclusion, the estrogen-responsive Agr2, a candidate breast cancer oncogene, regulates epithelial cell proliferation and lobuloalveolar development in the mammary gland. The pro-proliferative effects of Agr2 may explain its actions in early tumorigenesis.