Top quartile serum prolactin levels confer a twofold increase in the relative risk of developing breast cancer. Prolactin exerts this effect at an ill defined point in the carcinogenic process, via mechanisms involving direct action via prolactin receptors within mammary epithelium and/or indirect action through regulation of other hormones such as estrogen and progesterone. We have addressed these questions by examining mammary carcinogenesis in transplants of mouse mammary epithelium expressing the SV40T oncogene, with or without the prolactin receptor, using host animals with a normal endocrine system. In prolactin receptor knockout transplants the area of neoplasia was significantly smaller (7 versus 17%; P < 0.001 at 22 weeks and 7 versus 14%; P = 0.009 at 32 weeks). Low-grade neoplastic lesions displayed reduced BrdU incorporation rate (11.3 versus 17% P = 0.003) but no change in apoptosis rate. Tumor latency increased (289 days versus 236 days, P < 0.001). Tumor frequency, growth rate, morphology, cell proliferation and apoptosis were not altered. Thus, prolactin acts directly on the mammary epithelial cells to increase cell proliferation in preinvasive lesions, resulting in more neoplasia and acceleration of the transition to invasive carcinoma. Targeting of mammary prolactin signaling thus provides a strategy to prevent the early progression of neoplasia to invasive carcinoma.