Prolactin-secreting pituitary tumors can be induced in young rats through prolonged estrogen treatment. Recent evidence suggests that such tumors are associated with a degeneration of tuberoinfundibular dopaminergic (TI-DA) neurons, which normally inhibit prolactin secretion by the anterior pituitary's lactrophs. For this study, chronic hyperprolactinemia was induced in young, ovariectomized Fisher 344 rats through Silastic capsule implants of 17 beta-estradiol, placed subcutaneously for 1 month prior to removal. Rats with such estrogen-induced hyperprolactinemia then received transplants of neonatal arcuate-median eminence (ME) tissue (containing TI-DA neurons) or amygdala (control) tissue, placed either within the third ventricle or bilaterally within the hypothalamus. Blood samples were obtained 1 month after transplantation and prolactin concentrations measured by radioimmunoassay. Two of 4 animals receiving ventricularly-placed arcuate-ME transplants and 4 of 7 animals receiving bilateral arcuate-ME transplants showed substantial reductions in plasma prolactin levels compared to mean values in control animals. Follow-up catecholamine (CA) histochemistry indicated a bright fluorescence intensity in the median eminence of animals remaining hyperprolactinemic with ineffective transplants. Furthermore, in sharp contrast to the very low, nonpulsatile LH levels found during a second bleeding in recipients bearing ineffective transplants, recipients with effective arcuate-ME transplants had the high, pulsatile levels of LH characteristic of normal, ovariectomized rats. These data suggest that developing TI-DA neurons, within effective arcuate-ME transplants, became functional to reinstate or accentuate DA inhibition of prolactin secretion and, in so doing, indirectly normalized LH secretion as well.