The effect of prolactin on phospholipid metabolism in the prolactin-dependent rat lymphoma cell line Nb2 was investigated in cells prelabeled with [3H]arachidonic acid or [3H]ethanolamine. Prolactin (20 ng/ml) caused (a) a 20-60% loss of radiolabeled phosphatidylethanolamine within 0.5 to 2 min, (b) a loss of [3H]ethanolamine-labeled phosphatidylethanolamine from crude membranes, (c) a rapid accumulation of [3H]phosphoethanolamine and [3H]ethanolamine, and (d) a transient increase (15 s to 2 min) in prostaglandin F2 alpha and E2. Arachidonic acid (1-2 micrograms/ml) induced Nb2 cell growth but prostaglandin F2 alpha, E2, ethanolamine, and phosphoethanolamine did not. Prostaglandin E2 inhibited while prostaglandin F2 alpha enhanced growth in the presence of prolactin or arachidonic acid. These results suggest that stimulation of Nb2 cell growth by prolactin is linked to activation of a phosphatidylethanolamine-specific phospholipase C. Arachidonic acid and prostaglandin F2 alpha may participate in regulating the mitogenic action of prolactin.