Sixteen Hereford and 16 Holstein heifers were used to study the relationship of milk production potential to mammary development and differentiation. Heifers were slaughtered at 150, 180, and 260 days of first gestation and at 49 days of first lactation. Prolactin binding capacity of mammary tissue was 2.5 fold higher in dairy than beef heifers at day 260 of gestation (27.2 vs 11.0 fmols/mg protein). In both breeds, maximal growth hormone binding in liver coincided with the beginning of the rapid phase of mammary growth at 180 days. Mammary tissue from dairy heifers released more casein and alpha-lactalbumin during in vitro incubations than tissue from beef heifers. No differences were observed between breeds with respect to incorporation of [14C]acetate into lipids. Mass of dairy mammary tissue at 49 days of lactation was 3.3 times greater (16.4 vs 4.9 kg) and produced 5.7 times more milk (20.3 vs 3.5 kg/day) than its beef counterpart. The total DNA content and the RNA/DNA ratio of lactating dairy mammary tissue was approximately twice that of lactating beef mammary tissue. The data suggested that the higher milk production observed in dairy cattle is a result of a greater number of secretory cells and greater activity per cell.