Cow's milk contains high levels of estrogens, progesterone and insulin-like growth factor 1 (IGF-1), all of which are associated with breast cancer. We investigated whether prepubertal milk exposure affects mammary gland development and carcinogenesis in rats. Sprague–Dawley rats were given either whole milk or tap water to drink from postnatal day (PND) 14 to PND 35, and thereafter normal tap water. Mammary tumorigenesis was induced by administering 7,12-dimethylbenz[a]anthracene on PND 50. Milk exposure increased circulating E2 levels on PND 25 by 10-fold (p < 0.001) and accelerated vaginal opening, which marks puberty onset, by 2.5 days (p < 0.001). However, rats exposed to milk before puberty exhibited reduced carcinogen-induced mammary carcinogenesis; that is, their tumor latency was longer (p < 0.03) and incidence was lower (p < 0.05) than in the controls. On PND 25 and 50, mammary glands of the milk-exposed rats had significantly less terminal end buds (TEBs) than the tap water-exposed controls (p < 0.019). ER-α protein levels were elevated in the TEBs and lobules of milk rats, compared to rats given tap water (p < 0.019), but no changes in cyclin D1 expression, cell proliferation or apoptosis were seen. IGF-1 mRNA levels were reduced on PND 50 in the mammary glands of rats exposed to milk at puberty. Our results suggest that drinking milk before puberty reduces later risk of developing mammary cancer in rats. This might be mediated by a reduction in the number of TEBs and lower expression of IGF-1 mRNA in the mammary glands of milk-exposed animals.