The GATA-type zinc finger transcription factor TRPS1 has been implicated in breast cancer. However, its precise role remains unclear, as both amplifications and inactivating mutations in TRPS1 have been reported. Here, we used in vitro and in vivo loss-of-function approaches to dissect the role of TRPS1 in mammary gland development and invasive lobular breast carcinoma, which is hallmarked by functional loss of E-cadherin. We show that TRPS1 is essential in mammary epithelial cells, since TRPS1-mediated suppression of interferon signaling promotes in vitro proliferation and lactogenic differentiation. Similarly, TRPS1 expression is indispensable for proliferation of mammary organoids and in vivo survival of luminal epithelial cells during mammary gland development. However, the consequences of TRPS1 loss are dependent on E-cadherin status, as combined inactivation of E-cadherin and TRPS1 causes persistent proliferation of mammary organoids and accelerated mammary tumor formation in mice. Together, our results demonstrate that TRPS1 can function as a context-dependent tumor suppressor in breast cancer, while being essential for growth and differentiation of normal mammary epithelial cells.