Normal mammary development requires coordinated interactions of numerous factors, including prolactin (PRL) and insulin-like growth factor I (IGF-I), both of which have also been implicated in breast cancer pathogenesis and progression. We previously reported that PRL and IGF-I synergize in breast cancer cells to activate ERK1/2 and AKT, leading to increased proliferation, survival, and invasion. Intriguingly, PRL co-treatment with IGF-I augments IGF-I receptor (IGF-IR) phosphorylation 2-fold higher than IGF-I alone. Here, we showed the importance of the tyrosine phosphatase SHP-2 in this cross-talk using pharmacological inhibition and small interfering RNA. SHP-2 recruitment to IGF-IR was significantly attenuated by PRL co-treatment. Src family kinase activity was required for IGF-IR association with SHP-2, ligand-induced IGF-IR internalization, and PRL-enhanced IGF-IR phosphorylation. Inhibition of internalization, via knockdown of the GTPase, dynamin-2, prevented not only IGF-IR dephosphorylation, but also PRL-enhanced IGF-IR phosphorylation. Consistently, PRL diminished IGF-I-induced IGF-IR internalization, which may result from reduced SHP-2 association with IGF-IR, because we demonstrated an essential role for SHP-2 in IGF-IR internalization. Together, these findings describe a novel mechanism of cross-talk between PRL and IGF-I in breast cancer cells, with implications for our understanding of tumor progression and potential therapeutic strategies.