In mammary epithelial cells, prolactin (PRL) activates at least two signaling pathways: Jak/Stat and nitric oxide (NO). The former induces differentiation as measured by alpha-lactalbumin accumulation, while experiments with sodium nitroprusside (SNP) show that NO inhibits differentiation. In order to resolve this apparent contradiction, the kinetics, inducibility, and cellular localization of NO production and sensitivity in mammary cells were examined. First, mammary cells remained responsive to PRL throughout the incubation with respect to NO production. Second, although desensitization occurred with continuous PRL exposure, recovery began as quickly as 30 min after PRL withdrawal. Since PRL is secreted in pulses in vivo, complete desensitization was not a likely explanation for the cells' escape from NO inhibition. Finally, the cellular site of transduction was examined using the caveolar disrupting agent, methyl-beta-cyclodextrin (MBCD). MBCD inhibited the accumulation of PRL-induced NO but not alpha-lactalbumin. This finding was confirmed by membrane fractionation studies where the PRL-induced NO production occurred primarily in caveolae and PRL-stimulated tyrosine phosphorylation of Stat5, which transcribes the alpha-lactalbumin gene, occurred predominantly in noncaveolar membranes. Finally, endogenous elevations of NO by arginine did not inhibit differentiation. As such, the inhibition seen with SNP appeared to be an artifact of the ubiquitous generation of NO from SNP. Physiologically, PRL induces NO only in caveolae and this restricted distribution does not interfere with differentiation. (c) 2005 Elsevier Ireland Ltd. All rights reserved.