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Abstract Breast cancer is a heterogenous disease that can be classified into multiple subtypes including the most aggressive basal-like and triple-negative subtypes. Understanding the heterogeneity within the normal mammary basal epithelial cells holds the key to inform us about basal-like cancer cell differentiation dynamics as well as potential cells of origin. Although it is known that the mammary basal compartment contains small pools of stem cells that fuel normal tissue morphogenesis and regeneration, a comprehensive yet focused analysis of the transcriptional makeup of the basal cells is lacking. We used single-cell RNA-sequencing and multiplexed RNA in-situ hybridization to characterize mammary basal cell heterogeneity. We used bioinformatic and computational pipelines to characterize the molecular features as well as predict differentiation dynamics and cell–cell communications of the newly identified basal cell states. We used genetic cell labeling to map the in vivo fates of cells in one of these states. We identified four major distinct transcriptional states within the mammary basal cells that exhibit gene expression signatures suggestive of different functional activity and metabolic preference. Our in vivo labeling and ex vivo organoid culture data suggest that one of these states, marked by Egr2 expression, represents a dynamic transcriptional state that all basal cells transit through during pubertal mammary morphogenesis. Our study provides a systematic approach to understanding the molecular heterogeneity of mammary basal cells and identifies previously unknown dynamics of basal cell transcriptional states.