Heterozygous mutations in any of three major genes, BRCA1, BRCA2 and PALB2, are associated with high-risk hereditary breast cancer susceptibility frequently seen as familial disease clustering. PALB2 is a key interaction partner and regulator of several vital cellular activities of BRCA1 and BRCA2, and is thus required for DNA damage repair and alleviation of replicative and oxidative stress. Little is however known about how PALB2-deficiency affects cell function beyond that, especially in the three-dimensional setting, and also about its role during early steps of malignancy development. To answer these questions, we have generated biologically relevant MCF10A mammary epithelial cell lines with mutations that are comparable to certain clinically important PALB2 defects. We show in a non-cancerous background how both mono- and biallelically PALB2-mutated cells exhibit gross spontaneous DNA damage and mitotic aberrations. Furthermore, PALB2-deficiency disturbs three-dimensional spheroid morphology, increases the migrational capacity and invasiveness of the cells, and broadly alters their transcriptome profiles. TGFβ signaling and KRT14 expression are enhanced in PALB2-mutated cells and their inhibition and knock down, respectively, lead to partial restoration of cell functions. KRT14-positive cells are also more abundant with DNA damage than KRT14-negative cells. The obtained results indicate comprehensive cellular changes upon PALB2 mutations, even in the presence of half dosage of wild type PALB2 and demonstrate how PALB2 mutations may predispose their carriers to malignancy.