In the tilapia (Oreochromis mossambicus), as in many euryhaline teleost fish, prolactin (PRL) plays a central role in freshwater adaptation, acting on osmoregulatory surfaces to reduce ion and water permeability and increase solute retention. Consistent with these actions, PRL release is stimulated as extracellular osmolality is reduced both in vivo and in vitro. In the current experiments, a perfusion system utilizing dispersed PRL cells was developed for permitting the simultaneous measurement of cell volume and PRL release. Intracellular Ca²⁺ was monitored using fura 2-loaded cells under the same conditions. When PRL cells were exposed to hyposmotic medium, an increase in PRL cell volume preceded the increase in PRL release. Cell volume increased in proportion to decreases of 15 and 30% in osmolality. However, regulatory volume decrease was clearly seen only after a 30% reduction. The hyposmotically induced PRL release was sharply reduced in Ca²⁺-deleted hyposmotic medium, although cell volume changes were identical to those observed in normal hyposmotic medium. In most cells, a rise in intracellular Ca²⁺ concentration ([Ca²⁺]_i) during hyposmotic stimulation was dependent on the availability of extracellular Ca²⁺, although small transient increases in [Ca²⁺]_i were sometimes observed upon introduction of Ca²⁺-deleted media of the same or reduced osmolality. These results indicate that an increase in cell size is a critical step in the transduction of an osmotic signal into PRL release and that the hyposmotically induced increase in PRL release is greatly dependent on extracellular Ca²⁺.