Advances in stem cell research have enabled the generation of mini-organs or organoids that recapitulate phenotypic traits of the original biological specimen to study normal development and disease. Although organoids have been demonstrated for multiple organ systems, there are limited options for studying mouse mammary gland formation in vitro. Further characterization of the cellular heterogeneity within the mammary gland is important for deciphering mechanisms that predispose cells to oncogenesis. Here we have built upon previously described culture assays to define culture conditions that enable the efficient generation of clonal organoid structures from single-sorted basal mammary epithelial cells (MECs). Analysis of Confetti-reporter mice revealed the formation of uni-coloured structures and thus the clonal nature of these organoids. Furthermore, high resolution 3D imaging demonstrated that this assay recapitulates the cellular architecture of the mammary gland: budding organoids derived from basal MECs consisted of an inner compartment of polarized luminal cells with milk-producing capacity and an outer network of elongated myoepithelial cells. Conversely, structures generated from luminal MECs rarely contained basal/myoepithelial cells. Moreover, flow cytometry and 3D confocal microscopy analysis of organoids generated from lineage-specific reporter mice established the bipotent capacity of basal cells and the restricted potential of luminal cells. This robust mammary organoid model offers a versatile and rapid system for exploring tissue dynamics and mechanisms underlying breast oncogenesis following genetic manipulation using technologies such as CRISPR/Cas9 editing.