  Low-mass "dwarf" galaxies represent the most significant challenges to the
cold dark matter (CDM) model of cosmological structure formation. Because these
faint galaxies are (best) observed within the Local Group (LG) of the Milky Way
(MW) and Andromeda (M31), understanding their formation in such an environment
is critical. We present first results from the Latte Project: the Milky Way on
FIRE (Feedback in Realistic Environments). This simulation models the formation
of a MW-mass galaxy to z = 0 within LCDM cosmology, including dark matter, gas,
and stars at unprecedented resolution: baryon particle mass of 7070 Msun with
gas kernel/softening that adapts down to 1 pc (with a median of 25 - 60 pc at z
= 0). Latte was simulated using the GIZMO code with a mesh-free method for
accurate hydrodynamics and the FIRE-2 model for star formation and explicit
feedback within a multi-phase interstellar medium. For the first time, Latte
self-consistently resolves the spatial scales corresponding to half-light radii
of dwarf galaxies that form around a MW-mass host down to Mstar > 10^5 Msun.
Latte's population of dwarf galaxies agrees with the LG across a broad range of
properties: (1) distributions of stellar masses and stellar velocity
dispersions (dynamical masses), including their joint relation; (2) the
mass-metallicity relation; and (3) a diverse range of star-formation histories,
including their mass dependence. Thus, Latte produces a realistic population of
dwarf galaxies at Mstar > 10^5 Msun that does not suffer from the "missing
satellites" or "too big to fail" problems of small-scale structure formation.
We conclude that baryonic physics can reconcile observed dwarf galaxies with
standard LCDM cosmology.
