17-(Allylamino)-17-demethoxygeldanamycin (17-AAG) is an ansamycin antibiotic that binds to a conserved pocket in Hsp90 and induces the degradation of proteins that require this chaperone for conformational maturation. 17-AAG causes a retinoblastoma (RB)-dependent G1 block in cancer cells and is now in clinical trial. In breast cancer cells, G1 block is accompanied by differentiation and followed by apoptosis. The differentiation is characterized by specific changes in morphology and induction of milk fat proteins and lipid droplets. In cells lacking RB, neither G1 arrest nor differentiation occurs; instead, they undergo apoptosis in mitosis. Introduction of RB into these cells restores the differentiation response to 17-AAG. Inhibitors of the ras, mitogen-activated protein kinase, and phosphatidylinositol 3-kinase pathways cause accumulation of milk fat proteins and induction of lipid droplets when associated with G1 arrest but do not cause morphological changes. Thus, regulation of Hsp90 function by 17-AAG in breast cancer cells induces RB-dependent morphological and functional mammary differentiation. G1 arrest is sufficient for some but not all aspects of the phenotype. Induction of differentiation may be responsible for some of the antitumor effects of this drug.