Functional development of the mammary gland is controlled by systemic hormones and local growth regulators. We have identified and investigated signaling mechanisms in the prolactin and activin/inhibin pathways. While prolactin is synthesized in the pituitary gland and exerts its function as a systemic hormone, activin/inhibin signaling is confined to mesenchymal-epithelial interactions in the mammary gland. PRL induces lobulo-alveolar growth and differentiation. Two categories of PRL-induced biological effects can be distinguished, stimulation of cell proliferation and cell differentiation. In vivo experiments performed in this laboratory have now demonstrated that signal transduction by the PRL receptor proceed through the JAK-STAT pathway. PRL binding to its receptor leads to receptor dimerization and the activation of the Janus kinase 2 (JAK2). JAK2 phosphorylates Stat5a and Stat5b on specific tyrosine residues. Upon this activation these transcription factors induce yet unknown target genes which control proliferation and differentiation. Mice with an inactivated Stat5a gene were established. Since Stat5a is expressed in many organs and is in the line of fire of multiple signaling pathways, late fetal or neonatal lethality could have been expected in the absence of this proteins. However, defects were confined to a few tissues and specific physiological conditions. One noticeable phenotype of the Stat5a-deficient mice was their inability to lactate. Two distinct and perhaps separable phenotypes were noted. First, a reduction of alveoli and secondly, a failure of alveoli to undergo functional differentiation. The superimposable expression pattern of Stat5a and Stat5b during pregnancy and lactation in conjunction with the 96% sequence similarity between the two isoforms was a harbinger that Stat5b might be able to compensate for the loss of Stat5a. However, our studies demonstrate that Stat5a and Stat5b perform distinct functions. We have demonstrated that activin/inhibins signaling mediates ductal growth and alveolar differentiation in the mammary gland. Mice from which the activin/inhibins BB gene had been deleted failed to develop functional mammary glands. In particular, ductal outgrowth during puberty and alveolar development during pregnancy is impaired. Using transplantation studies we have demonstrated that activin/inhibins signaling proceeds thorough mesenchymal-epithelial interactions. Additional information on these and other research projects from this laboratory can be found under http://mammary.nih.gov/Hennighausen/index.html.