Beta-catenin is an executor of Wnt signaling and it can control cell fate and specification. Deletion of exon 3 from the endogenous beta-catenin gene in differentiating mammary alveolar epithelium of the mouse results in the generation of an activated protein that lacks amino acids 5-80. This is accompanied by a loss of mammary epithelial differentiation and a transdifferentiation process to squamous metaplasias. To further understand the molecular process of transdifferentiation, the expression of genes in mammary tissue was profiled in the absence and presence of activated of beta-catenin. Microarrays were generated that carry about 8500 cDNA clones with approximately 6000 obtained from mammary tissue. Mutant tissues, which had undergone either partial (TD1) or complete (TD2) squamous transdifferentiation, were compared with wild-type mammary tissue. Four groups of genes were identified. Group 1 contained genes whose expression was induced in both mutant tissues. Groups 2 and 3 contained genes that were active preferentially in TD2 and TD1, respectively. Group 4 contained genes suppressed in both samples. Using this approach, known and unknown genes activated in the transdifferentiation process were identified. A new 20 kDa protein (PANE1) induced upon transdifferentiation was nuclear in nonconfluent cells and cytoplasmic in confluent or dividing cells. Lastly, stabilization of beta-catenin resulted in the retention of differentiated epithelium upon involution and altered activities of several proteases in transdifferentiated mammary epithelium.