The mechanism of action of prolactin (PRL) has remained obscure despite the unveiling of the primary structure of PRL receptors. The present study demonstrates rapid PRL receptor-mediated tyrosine phosphorylation of at least three cellular proteins, designated p120, p97, and p40, in a rat T-lymphoma (Nb2-11C) as revealed by antiphosphotyrosine immunoblotting. One of the phosphotyrosyl proteins, p120, co-purified with activated PRL receptor complexes obtained using either anti-ligand or anti-receptor antibodies. Furthermore, in vitro incubation of affinity-purified PRL receptor complexes from PRL-stimulated cells with ATP in the presence of a tyrosine phosphatase inhibitor, resulted in a 10-15-fold increase in the phosphotyrosine content of p120, as revealed by antiphosphotyrosine immunoblotting. Parallel experiments utilizing [gamma-32P]ATP confirmed a rapid and time-dependent incorporation of phosphate into p120 in the same affinity-purified PRL receptor complexes. These data provide strong evidence for the involvement of a tyrosine kinase in PRL signal transduction and suggest the presence of a tyrosine kinase within the activated PRL receptor complex.