It is well established that childless women and women having children later in life are at an increased risk of developing breast cancer. In particular, women having a first child before 20 years of age have a 50% reduction in lifetime breast cancer risk when compared with women who do not have children. This protective effect is specific for estrogen receptor positive breast cancer. Nevertheless, it remains unclear how parity decreases breast cancer risk. Possible mechanisms of action include changes to the hormonal profile of parous women, a more differentiated and so less susceptible mammary gland or changes within specific epithelial cell subpopulations. In this review, we discuss the epidemiological evidence for the protective effects of parity on breast cancer. We also explore the mechanisms by which parity protects, with a particular emphasis on the role of stem cells and the interactions between stem cells and estrogen.