Despite the importance of the RAS-RAF-MAPK pathway in normal physiology and disease of numerous organs, its role during pituitary development and tumourigenesis remains largely unknown. Here we show that the over-activation of the MAPK pathway, through conditional expression of the gain-of-function alleles BrafV600E and KrasG12D in the developing mouse pituitary, results in severe hyperplasia and abnormal morphogenesis of the gland by the end of gestation. Cell-lineage commitment and terminal differentiation are disrupted, leading to a significant reduction in numbers of most of the hormone-producing cells before birth, with the exception of corticotrophs. Of note, Sox2+ve stem cells and clonogenic potential are drastically increased in the mutant pituitaries. Finally, we reveal that papillary craniopharyngioma (PCP), a benign human pituitary tumour harbouring BRAF p.V600E also contains Sox2+ve cells with sustained proliferative capacity and disrupted pituitary differentiation. Together, our data demonstrate a critical function of the MAPK pathway in controlling the balance between proliferation and differentiation of Sox2+ve cells and suggest that persistent proliferative capacity of Sox2+ve cells may underlie the pathogenesis of PCP.