Expression of gp78, an E3 ubiquitin ligase in endoplasmic reticulum-associated degradation, is associated with tumor malignancy. To study gp78 overexpression in mammary gland development and tumorigenicity, we generated murine mammary tumor virus (MMTV) long terminal repeat-driven gp78 transgenic mice. Embryos carrying the gp78 transgene cassette were implanted in FVB surrogate mothers, and two founders with high copy integration showed elevated gp78 expression at both transcript and protein levels at the virgin stage and at 12 days gestation. Transgenic mammary glands showed increased ductal branching, dense alveolar lobule formation, and secondary terminal end bud development. Bromodeoxyuridine staining showed increased proliferation in hyperplastic ductal regions at the virgin stage and at 12 days gestation compared with wild type mice. Reduced expression of the metastasis suppressor KAI1, a gp78 endoplasmic reticulum-associated degradation substrate, demonstrates that gp78 ubiquitin ligase activity is increased in MMTV-gp78 mammary gland. Similarly, metastatic MDA-435 cells exhibit increased gp78 expression, decreased KAI1 expression, and elevated proliferation compared with nonmetastatic MCF7 cells whose proliferation was enhanced upon knockdown of KAI1. Importantly, stable gp78 knockdown HEK293 cells showed increased KAI1 expression and reduced proliferation that was rescued upon KAI1 knockdown, demonstrating that gp78 regulation of cell proliferation is mediated by KAI1. Mammary tumorigenesis was not observed in repeatedly pregnant MMTV-long terminal repeat-gp78 transgenic mice over a period of 18 months post-birth. Elevated gp78 ubiquitin ligase activity is therefore not sufficient for mammary tumorigenesis. However, the hyperplastic phenotype observed in mammary glands of MMTV-gp78 transgenic mice identifies a novel role for gp78 expression in enhancing mammary epithelial cell proliferation and nontumorigenic ductal outgrowth.