Prolactin (PRL) is a major determinant of mammary epithelial cell proliferation during alveolar development in sexually mature and pregnant mice. To date, it has not been clear whether PRL effects these responses alone or by also invoking the action of autocrine/paracrine growth factors. In this study, we provide evidence that part of the effect of PRL on mammary gland growth is mediated by IGF-II. During sexual maturity and in early pregnancy, the level of IGF-II mRNA in the mammary gland was increased concurrent with increased PRL receptor expression. The level of IGF-II mRNA was reduced in mammary tissue from PRL receptor-/- mice during early pregnancy, and explants of mouse mammary gland and HC11 mammary epithelial cells both increased their expression of IGF-II after exposure to PRL in vitro. These findings coincided with the demonstration that IGF-II stimulated alveolar development in mammary glands in whole organ culture. PRL was most efficacious in stimulating IGF-II gene transcription from promoter 3 of the mouse IGF-II gene in vitro. Insight into the mechanism by which PRL induced IGF-II expression was provided by the fact that it was blocked by the Jak2 inhibitor AG490 and the MAPK inhibitor PD98059. Finally, induction of insulin receptor substrate (IRS)-1 in the mammary glands of PRL-treated mice and induction of IRS-1 and IRS-2 after treatment with PRL plus progesterone indicates that these molecules are induced by PRL as potential signaling intermediates downstream from IGF-I/insulin receptors. Together, these data demonstrate a role for IGF-II as a mediator of PRL action in the mouse mammary gland during ductal branching and alveolar development.