The 16 kDa prolactin fragment arises from partial proteolysis of the native 23 kDa prolactin pituitary hormone. The mammary gland has been involved in this processing, although it has not been clarified whether it occurs in stroma or epithelial cells or extracellularly. Also, the processing enzyme has not been defined yet. Here we show that the incubation medium of stroma-deprived mammary acini from lactating rat contains an enzymatic activity able to cleave, in a temperature- and time-dependent fashion, the 23 kDa prolactin to generate a 16 kDa prolactin detectable under reducing conditions. This cleavage was not impaired in the presence of hirudin, a thrombin inhibitor, but strongly weakened in the presence of pepstatin A, a cathepsin D inhibitor. Cathepsin D immuno-depletion abolished the capability of acini-conditioned medium to cleave the 23 kDa prolactin. Brefeldin A treatment of acini, a condition that largely abolished the apical secretion of milk proteins, did not impair the secretion of the enzymatically active single chain of cathepsin D. These results show that mature cathepsin D from endosomes or lysosomes is released, likely at the baso-lateral site of mammary epithelial cells, and that a cathepsin D-dependent activity is required to effect, under physiological conditions, the cleavage of 23 kDa prolactin in the extracellular medium. This is the first report demonstrating that cathepsin D can perform a limited proteolysis of a substrate at physiological pH outside the cell.