Breast epithelial stem cells are thought to be the primary targets in the etiology of breast cancer. Since breast cancers mostly express estrogen and progesterone receptor (ERalpha and PR), we examined the biology of these ERalpha/PR-positive cells and their relationship to stem cells in normal human breast epithelium. We employed several complementary approaches to identify putative stem cell markers, to characterise an isolated stem cell population and to relate these to cells expressing the steroid receptors ERalpha and PR. Using DNA radiolabelling in human tissue implanted into athymic nude mice, a population of label-retaining cells were shown to be enriched for the putative stem cell markers p21(CIP1) and Msi-1, the human homolog of Drosophila Musashi. Steroid receptor-positive cells were found to co-express these stem cell markers together with cytokeratin 19, another putative stem cell marker in the breast. Human breast epithelial cells with Hoechst dye-effluxing "side population" (SP) properties characteristic of mammary stem cells in mice were demonstrated to be undifferentiated "intermediate" cells by lack of expression of myoepithelial and luminal apical membrane markers. These SP cells were 6-fold enriched for ERalpha-positive cells and expressed several fold higher levels of the ERalpha, p21(CIP1) and Msi1 genes than non-SP cells. In contrast to non-SP cells, SP cells formed branching structures in matrigel which included cells of both luminal and myoepithelial lineages. The data suggest a model where scattered steroid receptor-positive cells are stem cells that self-renew through asymmetric cell division and generate patches of transit amplifying and differentiated cells.