A cleaved form of PRL (CPRL) has been reported to exist naturally in the pituitary and to be the main product of PRL proteolysis by its target tissues. A 16K fragment derived from CPRL has mammary mitogenic activity. To analyze the possible functional significance of the cleavage of PRL by its target tissues, the CPRL and a 16K fragment were generated by incubation of unlabeled rat (r) PRL with a 25,000 × g pellet from the mammary gland and liver of rats. The optimum pH for cleavage was 3.4. PRL and the cleaved products were easily identified and separated from other proteins in the sample. The mammary gland pellet from lactating rats was significantly more potent at cleaving the rPRL molecule than were those of virgin or pregnant rats. However, the livers of all rats showed a similar PRL-cleaving potency. Thus, target tissues may differ in their PRL-cleaving potencies in different physiological states. The PRL-cleaving activity was also present in rat milk. While cleaved and 16K PRLs were the only proteolytic products obtained from rPRL, the PRLs (ovine and human) or the GHs (rat, bovine, and human) of other species were processed into a variety of low mol wt forms. Human placental lactogen was not modified. Accordingly, the processing of rPRL by target tissue enzymes appears to be hormone and species specific. Cleaved and 16K PRLs had 100% and 6.5% of the binding activity for rat liver PRL receptors as did intact rPRL, respectively. Nevertheless, the 16K form may still be of physiological significance (Endocrinology121: 2055–2064, 1987)