Despite the growing body of evidence supporting prolactin (PRL) actions in human breast cancer, little is known regarding PRL regulation of its own receptor in these cells. Ligand-initiated endocytosis is a key process in the regulation of receptor availability and signaling cascades that may lead to oncogenic actions. Although exposure to exogenous PRL accelerates degradation of the long isoform of the PRL receptor (lPRLR), neither the signals initiated by PRL that lead to lPRLR internalization and subsequent down-regulation, nor the relationship to downstream pathways are understood in breast cancer cells. In this study, we showed that PRL-induced down-regulation of the lPRLR was reduced by inhibition of src family kinases (SFKs), but not Janus kinase 2, in MCF-7 cells. Inhibition of SFKs also resulted in accumulation of a PRL-induced PRLR fragment containing the extracellular domain, which appeared to be generated from newly synthesized PRLR. lPRLR was constitutively associated with SFKs in lipid rafts. PRL-induced SFK activation led to recruitment of the guanosine triphosphatase, dynamin-2, to an internalization complex, resulting in endocytosis. Inhibition of endocytosis by small interfering RNA-mediated knockdown of dynamin-2 blocked PRL-induced down-regulation of lPRLR, confirming that internalization is essential for this process. Endocytosis also was required for optimal phosphorylation of ERK1/2 and Akt, but not for Janus kinase 2 or signal transducer and activator of transcription 5, indicating that internalization selectively modulates signaling cascades. Together, these data indicate that SFKs are key mediators of ligand-initiated lPRLR internalization, down-regulation, and signal transduction in breast cancer cells, and underscore the importance of target cell context in receptor trafficking and signal transduction.