The study of the development of the mammary gland at the molecular level in the animal is difficult because of the complex tissue organization of the gland. We have previously developed an in vitro system for genetic analysis of mammary cell differentiation, based on the cell line LA7 clonally derived from a rat mammary adenocarcinoma. This cell line, after induction with DMSO, differentiates forming structures called domes. This process is under strict gene regulation, and we have previously identified several of the genes involved. In the present paper, we have defined the meaning of dome formation in relation to mammary development, by showing that treatment of LA7 cells with the lactogenic hormones hydrocortisone and prolactin induces dome formation; in the animal, these hormones precede and accompany milk production. Moreover, dome formation is accompanied by expression within the cells of the milk protein genes WDMN1 and beta-casein, which are differentiation markers for the gland during pregnancy and lactation. We also show that two proteins, highly expressed in the mammary gland during lactation, HSP90-beta and annexin I, are strongly expressed in DMSO-induced LA7 cells. Both proteins are essential in the formation of domes because when their synthesis is blocked by antisense RNA oligonucleotides, dome formation is abolished. Thus our in vitro system is a model for lobulo-alveolar development, and the genes identified in the pathway of dome formation are likely to be involved in the early differentiation steps occurring in the rat mammary gland during pregnancy and lactation.