The breast epithelium has two major compartments, luminal and basal cells, that are established and maintained by poorly understood mechanisms. The p53 homolog, p63, is required for the formation of mammary buds, but its function in the breast after birth is unknown. We show that in primary human breast epithelial cells, maintenance of basal cell characteristics depends on continued expression of the p63 isoform, ΔNp63, which is expressed in the basal compartment. Forced expression of ΔNp63 in purified luminal cells confers a basal phenotype. Notch signaling downmodulates ΔNp63 expression and mimics ΔNp63 depletion, whereas forced expression of ΔNp63 partially counteracts the effects of Notch. Consistent with Notch activation specifying luminal cell fate in the mammary gland, Notch signaling activity is specifically detected in mice at sites of pubertal ductal morphogenesis where luminal cell fate is determined. Basal cells in which Notch signaling is active show decreased p63 expression. Both constitutive expression of ΔNp63 and ablation of Notch signaling are incompatible with luminal cell fate. Thus, the balance between basal and luminal cell compartments of the breast is regulated by antagonistic functions of ΔNp63 and Notch.