Mammalian polarity proteins have been studied predominantly in cell culture systems, and little is known about their functions in vivo. To address this issue, we used a shRNA lentiviral system to manipulate gene expression in mouse mammary stem/progenitor cells. Transplantation of Par3-depleted stem/progenitor cells into the mammary fat pad severely disrupted mammary development, and glands were characterized by ductal hyperplasia, luminal filling, and highly disorganized end bud structures that were unable to remodel into normal ductal structures. Unexpectedly, Par3-depleted mammary glands also had an expanded progenitor population. We identified a novel function for the atypical protein kinase C (aPKC)-binding domain of Par3 in restricting Par3 and aPKC to the apical region in mammary epithelia in vivo, and found that mammary morphogenesis is dependent on the ability of Par3 to directly bind aPKC. These results reveal a new function for Par3 in the regulation of progenitor differentiation and epithelial morphogenesis in vivo and demonstrate for the first time an essential requirement for the Par3-aPKC interaction.