To discover mechanisms that mediate plasticity in mammary cells, we characterized signaling networks that are present in the mammary stem cells responsible for fetal and adult mammary development. These analyses identified a signaling axis between FGF signaling and the transcription factor Sox10. Here, we show that Sox10 is specifically expressed in mammary cells exhibiting the highest levels of stem/progenitor activity. This includes fetal and adult mammary cells in vivo and mammary organoids in vitro. Sox10 is functionally relevant, as its deletion reduces stem/progenitor competence whereas its overexpression increases stem/progenitor activity. Intriguingly, we also show that Sox10 overexpression causes mammary cells to undergo a mesenchymal transition. Consistent with these findings, Sox10 is preferentially expressed in stem- and mesenchymal-like breast cancers. These results demonstrate a signaling mechanism through which stem and mesenchymal states are acquired in mammary cells and suggest therapeutic avenues in breast cancers for which targeted therapies are currently unavailable.