The transcription factor Gata-3 is a definitive marker of luminal breast cancers and a key regulator of mammary morphogenesis. Here we have explored a role for Gata-3 in tumor initiation and the underlying cellular mechanisms using a mouse model of "luminal-like" cancer. Loss of a single Gata-3 allele markedly accelerated tumor progression in mice carrying the mouse mammary tumor virus promoter-driven polyomavirus middle T antigen (MMTV-PyMT mice), while overexpression of Gata-3 curtailed tumorigenesis. Through the identification of two distinct luminal progenitor cells in the mammary gland, we demonstrate that Gata-3 haplo-insufficiency increases the tumor-initiating capacity of these progenitors but not the stem cell-enriched population. Overexpression of a conditional Gata-3 transgene in the PyMT model promoted cellular differentiation and led to reduced tumor-initiating capacity as well as diminished angiogenesis. Transcript profiling studies identified caspase-14 as a novel downstream target of Gata-3, in keeping with its roles in differentiation and tumorigenesis. A strong association was evident between GATA-3 and caspase-14 expression in preinvasive ductal carcinoma in situ samples, where GATA-3 also displayed prognostic significance. Overall, these studies identify GATA-3 as an important regulator of tumor initiation through its ability to promote the differentiation of committed luminal progenitor cells.