Current androgen ablation therapies for prostate cancer are initially successful, but the frequent development of castration resistance urges the generation of alternative therapies and represents an important health concern. Prolactin/signal transducer and activator of transcription 5 (STAT5) signaling is emerging as a putative target for alternative treatment for prostate cancer. However, mechanistic data for its role in development or progression of prostate tumors are scarce. In vivo mouse studies found that local prolactin induced the amplification of prostate epithelial basal/stem cells. Because these cells are proposed cells of origin for prostate cancer and disease recurrence, we looked further into this amplification. Our results indicated that sustained Stat5 activation was associated with the occurrence of abnormal basal/stem cell clusters in prostate epithelium of prostate-specific prolactin-transgenic mice. Analysis of epithelial areas containing these clusters found high proliferation, Stat5 activation, and expression of stem cell antigen 1. Furthermore, enhanced prolactin signaling also led to amplification of a luminal cell population that was positive for stem cell antigen 1. These cells may originate from amplified basal/stem cells and might represent important progenitors for tumor development in prostate epithelium. These data provide a deeper understanding of the initial stages of prostate tumorigenesis induced by prolactin to help determine whether this hormone or its downstream messengers could be useful targets for prostate cancer treatment in the future.