The gene encoding mammary-derived growth inhibitor (MDGI), a protein previously purified from bovine mammary gland and shown to have modest antiproliferative activity for human breast cancer cells in vitro, is demonstrated to function as a potent tumor suppressor gene. Human breast cancer cells transfected with a MDGI expression construct exhibited differentiated morphology, reduced proliferation rate, reduced clonogenicity in soft agar, and reduced tumorgenicity in nude mice relative to mock-transfected or untransfected controls. We mapped the human homologue of this gene to chromosome 1p33-35, a locus previously shown to exhibit frequent loss of heterozygosity in human breast cancer. MDGI immunoreactivity was detected in epithelial cells of human breast tissue, but not on ductal carcinoma cells on the same sections. Our results suggest that MDGI is a strong candidate for the distal 1p breast tumor suppressor gene. Furthermore, as prior reports have demonstrated that MDGI is hormonally regulated in breast epithelial cells and maximally expressed at the time of maximal differentiated function (just prior to lactation), MDGI is a candidate mediator of the differentiating effect of pregnancy on breast epithelial cells, which may be involved in the protective effect of early parity on subsequent breast cancer incidence.