Some animals have been bred in space, but not mammals. Japanese researchers are looking into the possibility, and doing experiments with mice on earth that mimic lower gravity space conditions.
There were some baby mice produced after the embryos were implanted, but not many survived compared to a control group. Link -via Digg
To test these effects, the researchers artificially fertilized mouse eggs with sperm that had been stored inside a three-dimensional clinostat, a machine that mimics weightlessness by rotating objects in such a way that the effects of gravity are spread in every direction.
Fertilization took place normally, suggesting that microgravity hadn’t harmed the sperm. But as the embryos continued to develop inside the clinostat, many developed problems. Their cells had trouble dividing and maturing.
There were some baby mice produced after the embryos were implanted, but not many survived compared to a control group. Link -via Digg
I'd probably watch that
From Wikipedia:
"the Belt declared independence after creating Confinement Asteroid, a habitat with spin gravity that permitted safe gestation of children"