Advances in stem cell research have enabled the generation of mini-organs or organoids that recapitulate phenotypic traits of the original biological specimen. Although organoids have been demonstrated for multiple organ systems, there are more limited options for studying mouse mammary gland formation in vitro 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. High resolution 3D imaging demonstrated that basal cell-derived, complex organoids comprised 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 microscopy of organoids generated from lineage-specific reporter mice established the bipotent capacity of basal cells and the restricted potential of luminal cells. In summary, we describe optimized in vitro conditions for the efficient generation of mouse mammary organoids that recapitulate features of mammary tissue architecture and function, and can be applied to understand tissue dynamics and cell-fate decisions.