Caveolin-1 is a 22-kDa integral membrane protein that has been suggested to function as a negative regulator of mitogen-stimulated proliferation in a variety of cell types, including mammary epithelial cells. Because much of our insight into caveolin-1 function has come from the study of human breast tumor-derived cell lines in culture, the normal physiological regulators of caveolin-1 expression in the mammary gland remain unknown. Here, we examine caveolin-1 expression in mice at different stages of mammary gland development. We show that caveolin-1 expression is significantly down-regulated during late pregnancy and lactation. Upon weaning, mammary gland expression of caveolin-1 rapidly returns to non-pregnant "steady-state" levels. Injection of virgin mice with a battery of hormones normally up-regulated during lactation demonstrates that prolactin is the main mediator of caveolin-1 down-regulation. Virtually identical results were obtained with human mammary epithelial cells (hTERT-HME1) in culture. In addition, we demonstrate that prolactin-mediated down-regulation of caveolin-1 expression occurs at the level of transcriptional control and via a Ras-dependent mechanism. Interestingly, in the mammary gland, both mammary epithelial cells and the surrounding mammary adipocytes show prolactin-mediated down-regulation of caveolin-1. This hormone-dependent regulation of caveolin-1 expression is specific to the mammary fat pad. Finally, we employed HC11 cells, a well-established model of mammary epithelial cell differentiation, to study the possible functional effects of caveolin-1 expression. In the presence of lactogenic hormones, recombinant expression of caveolin-1 in HC11 cells dramatically suppresses the induction of the promoter activity and the synthesis of beta-casein, an established reporter of lactogenic differentiation and milk production. These findings may explain why caveolin-1 levels are normally down-regulated during lactation. This report is the first demonstration that caveolin-1 levels are down-regulated during a normal physiological event in vivo, i.e. lactation, because previous reports have only documented that down-regulation of caveolin-1 occurs during cell transformation and tumorigenesis.