The hormone prolactin (PRL) is the product of a single gene synthesized by pituitary and many extrapituitary tissues. In this study, we have purified and sequenced by mass spectrometry a 29 kDa protein from human synovial liquid, bound to the proteoglycan component of synovial liquid that showed an identical sequence in 20 amino acids to hPRL. We have also found PRL receptor (PRLR) in human knee tissues. The cartilage from osteoarthritic patients shows transcripts of the long PRLR isoform while synovial tissue expresses the intermediate PRLR isoform. Pluripotent mesenchymal stem cells (MSCs) can be isolated from adult bone marrow providing an excellent tool to study MSC-derived differentiation processes. We analyzed the expression of the PRL–PRLR system in hMSCs and during the acquisition of chondrocyte phenotype. We show by RT-PCR that intermediate PRLR isoform is expressed in hMSCs and that PRL exerts a significant increase in cell proliferation. In MSC aggregates cultured in chemically defined medium, we found that extrapituitary PRL transcripts are expressed and the receptor switches isoform expression from the intermediate to long isoform. Furthermore, in cell aggregates, PRL induces type II collagen and extrapituitary PRL expression. Histomorphologic analysis of cell aggregates showed that PRL induces the synthesis of proteoglycans and, in combination with glucocorticoids, a tissue structure with cells organized in longitudinal columns. Under the above conditions, electron microscopic observations show that PRL both downregulates the formation of fibrils of type II collagen and induces cell–cell interactions. All the results presented are consistent with a role of the PRL–PRLR system in bone/cartilage formation/repair processes.