We previously identified and characterized a novel tumor growth inhibitor and a fatty acid-binding protein in human mammary gland and named it the mammary-derived growth inhibitor-related gene (MRG). Here, the effects of MRG on mammary gland differentiation and its interaction with omega-3 polyunsaturated fatty acids (omega-3 PUFAs) on growth inhibition were investigated. MRG protein expression was associated with human mammary gland differentiation, with the highest expression observed in the differentiated alveolar mammary epithelial cells from the lactating gland. Overexpression of MRG in human breast cancer cells induced differentiation with changes in cellular morphology and a significant increase in the production of lipid droplets. Treatment of mouse mammary gland in organ culture with MRG protein resulted in a differentiated morphology and stimulation of beta-casein expression. Treatment of human breast cancer cells with the omega-3 PUFA docosahexaenoic acid resulted in a differential growth inhibition proportional to their MRG expression. MRG-transfected cells or MRG protein treated cells were much more sensitive to docosahexaenoic acid-induced growth inhibition than MRG-negative or untreated control cells. Our results suggest that MRG is a candidate mediator of the differentiating effect of pregnancy on breast epithelial cells and may play a major role in omega-3 PUFA-mediated tumor suppression.