Stimulation of mammary epithelial cells (MECs) by prolactin (PRL) leads to the activation of STAT5, a member of the family of Signal Transducers and Activators of Transcription. Proper STAT5 activation additionally requires the adherence of MECs to the extracellular matrix (ECM). However, the molecular mechanism behind this dual hormone- and adhesion-dependent regulation of the STAT5 signaling pathway is not known. We tested the hypothesis that lipid rafts, discrete regions within the plasma membrane that serve as concentrating platforms for receptors and other transmembrane proteins, were involved. We found that tyrosine phosphorylation of STAT5 was substantially diminished in physiologically relevant HC11 cells, nontumorigenic mouse MECs responsive to PRL, when their lipid rafts were disrupted by β-methylcyclodextrin, a cholesterol extracting agent. Furthermore, since small Rho GTPases preferentially bind lipid rafts maintained at the cell surface by integrin-mediated engagement to the ECM, their role in facilitating robust STAT5 activation was investigated.