Female 129:Stat1-null mice (129S6/SvEvTac-Stat1(tm1Rds) homozygous) uniquely develop estrogen-receptor (ER)-positive mammary tumors. Herein we report that the mammary glands (MG) of these mice have altered growth and development with abnormal terminal end buds alongside defective branching morphogenesis and ductal elongation. We also find that the 129:Stat1-null mammary fat pad (MFP) fails to sustain the growth of 129S6/SvEv wild-type and Stat1-null epithelium. These abnormalities are partially reversed by elevated serum progesterone and prolactin whereas transplantation of wild-type bone marrow into 129:Stat1-null mice does not reverse the MG developmental defects. Medium conditioned by 129:Stat1-null epithelium-cleared MFP does not stimulate epithelial proliferation, whereas it is stimulated by medium conditioned by epithelium-cleared MFP from either wild-type or 129:Stat1-null females having elevated progesterone and prolactin. Microarrays and multiplexed cytokine assays reveal that the MG of 129:Stat1-null mice has lower levels of growth factors that have been implicated in normal MG growth and development. Transplanted 129:Stat1-null tumors and their isolated cells also grow slower in 129:Stat1-null MG compared to wild-type recipient MG. These studies demonstrate that growth of normal and neoplastic 129:Stat1-null epithelium is dependent on the hormonal milieu and on factors from the mammary stroma such as cytokines. While the individual or combined effects of these factors remains to be resolved, our data supports the role of STAT1 in maintaining a tumor-suppressive MG microenvironment.