C-Src is infrequently mutated in human cancers but it mediates oncogenic signals of many activated growth factor receptors and thus remains a key target for cancer therapy. However, the broad function of Src in many cell types and processes requires evaluation of Src-targeted therapeutics within a normal developmental and immune-competent environment. In an effort to understand the appropriate clinical use of Src inhibitors, we tested an Src inhibitor, SKI-606 (bosutinib), in the MMTV-PyVmT transgenic mouse model of breast cancer. Tumor formation in this model is dependent on the presence of Src, but the necessity of Src kinase activity for tumor formation has not been determined. Furthermore, Src inhibitors have not been examined in an autochthonous tumor model that permits assessment of effects on different stages of tumor progression. Here we show that oral administration of SKI-606 inhibited the phosphorylation of Src in mammary tumors and caused a rapid decrease in the Ezh2 Polycomb group histone H3K27 methyltransferase and an increase in epithelial organization. SKI-606 prevented the appearance of palpable tumors in over 50% of the animals and stopped tumor growth in older animals with pre-existing tumors. These antitumor effects were accompanied by decreased cellular proliferation, altered tumor blood vessel organization and dramatically increased differentiation to lactational and epidermal cell fates. SKI-606 controls the development of mammary tumors by inducing differentiation.