The microenvironment plays a key role in the cellular differentiation of the two main cell lineages of the human breast, luminal epithelial, and myoepithelial. It is not clear, however, how the components of the microenvironment control the development of these cell lineages. To investigate how lineage development is regulated by 3-D culture and microenvironment components, we used the PMC42-LA human breast carcinoma cell line, which possesses stem cell characteristics. When cultured on a two-dimensional glass substrate, PMC42-LA cells formed a monolayer and expressed predominantly luminal epithelial markers, including cytokeratins 8, 18, and 19; E-cadherin; and sialomucin. The key myoepithelial-specific proteins α-smooth muscle actin and cytokeratin 14 were not expressed. When cultured within Engelbreth–Holm– Swarm sarcoma-derived basement membrane matrix (EHS matrix), PMC42-LA cells formed organoids in which the expression of luminal markers was reduced and the expression of other myoepithelial-specific markers (cytokeratin 17 and P-cadherin) was promoted. The presence of primary human mammary gland fibroblasts within the EHS matrix induced expression of the key myoepithelial-specific markers, α-smooth muscle actin and cytokeratin 14. Immortalized human skin fibroblasts were less effective in inducing expression of these key myoepithelial-specific markers. Confocal dual-labeling showed that individual cells expressed luminal or myoepithelial proteins, but not both. Conditioned medium from the mammary fibroblasts was equally effective in inducing myoepithelial marker expression. The results indicate that the myoepithelial lineage is promoted by the extracellular matrix, in conjunction with products secreted by breast-specific fibroblasts. Our results demonstrate a key role for the breast microenvironment in the regulation of breast lineage development.