Insulin is known to be an important regulator of milk secretion in the lactating mammary gland. Here we examine the role of insulin signaling in mammary development in pregnancy using a mouse with a floxed insulin receptor (IR) crossed with a mouse expressing Cre specifically in the mammary gland. In the mammary glands of these IR^fl/fl Cre+ mice expression of IR is significantly diminished throughout development. Glands from these mice had 50% fewer alveoli at mid-pregnancy; casein and lipid droplets were diminished by 60% and 75% respectively, indicating a role for IR both in alveolar development and differentiation. In an acinar preparation from mammary epithelial cells (MEC) isolated from pregnant mice, insulin stimulated lumen formation, mammary cell size, acinar size, acinar casein content and the formation of lipid droplets with a K_m of ~1.7 nM. IGF1 and IGF2 had no effect at concentrations below 50 nM and a function blocking antibody to the IGF type 1 receptor did not alter the response to insulin. We conclude that insulin interacting with IR is essential for mammary differentiation during murine pregnancy. Using array analysis we then examined the expression of genes up- or down-regulated >1.5 fold in the IR^fl/fl Cre+ mammary epithelial cells finding significant down-regulation of differentiation specific genes and up-regulation of cell cycle and extracellular matrix genes. We conclude that insulin fosters differentiation and may inhibit cell proliferation in the mammary gland of the mid-pregnant mouse.