The mechanism of action of prolactin (PRL) was studied in murine lymphoid BAF-3 cells transfected with either the long form of the PRL receptor (PRL-R), or a chimeric receptor consisting of the extracellular domain of the PRL-R and the transmembrane and intracellular domain of the erythropoietin receptor (PRL/EPO-R). PRL sustained normal and long-term proliferation of BAF-3 cells expressing either the PRL-R or the hybrid PRL/EPO-R. Upon [125I]PRL cross-linking, both types of BAF-3 transfectants were shown to express two [125I]PRL cross-linked species differing in size by 20 kDa. These cross-linked complexes, after denaturation, were recognized by antibody against the PRL-R, indicating that they contain the transfected receptor. PRL induced rapid and transient tyrosine phosphorylation of both the PRL-R and the PRL/EPO-R in BAF-3 transfectants. Furthermore, PRL induced rapid tyrosine phosphorylation of the Janus kinase 2 (JAK2) which was already physically associated with the PRL-R or the PRL/EPO-R in the absence of ligand. JAK1 was also associated with PRL-R and PRL/EPO-R in the absence of ligand. However, only in BAF-3 cells expressing the PRL-R does PRL induce rapid and transient tyrosine phosphorylation of JAK1. These results demonstrate that JAK protein tyrosine kinases couple PRL binding to tyrosine phosphorylation and proliferation.