It is well established that mammary gland development and lactation are tightly controlled by prolactin signaling. Binding of prolactin to its cognate receptor (Prl-R) leads to activation of the Jak-2 tyrosine kinase and the recruitment/tyrosine phosphorylation of STAT5a. However, the mechanisms for attenuating the Prl-R/Jak-2/STATSa signaling cascade are just now being elucidated. Here, we present evidence that caveolin-1 functions as a novel suppressor of cytokine signaling in the mammary gland, akin to the SOCS family of proteins. Specifically, we show that caveolin-1 expression blocks prolactin-induced activation of a STAT5a-responsive luciferase reporter in mammary epithelial cells. Furthermore, caveolin-1 expression inhibited prolactin-induced STAT5a tyrosine phosphorylation and DNA binding activity, suggesting that caveolin-1 may negatively regulate the Jak-2 tyrosine kinase. Because the caveolin-scaffolding domain bears a striking resemblance to the SOCS pseudosubstrate domain, we examined whether Jak-2 associates with caveolin-1. In accordance with this homology, we demonstrate that Jak-2 cofractionates and coimmunoprecipitates with caveolin-1. We next tested the in vivo relevance of these findings using female Cav-1 (-/-) null mice. If caveolin-1 normally functions as a suppressor of cytokine signaling in the mammary gland, then Cav-1 null mice should show premature development of the lobuloalveolar compartment because of hyperactivation of the prolactin signaling cascade via disinhibition of Jak-2. In accordance with this prediction, Cav-1 null mice show accelerated development of the lobuloalveolar compartment, premature milk production, and hyperphosphorylation of STAT5a (pY694) at its Jak-2 phosphorylation site. In addition, the Ras-p42/44 MAPK cascade is hyper-activated. Because a similar premature lactation phenotype is observed in SOCS1 (-/-) null mice, we conclude that caveolin-1 is a novel suppressor of cytokine signaling.