The pituitary hormone prolactin (PRL) regulates salt and water homeostasis by altering ion retention and water uptake through peripheral osmoregulatory organs. To understand the role of osmotic homeostasis in the development of PRL-secreting lactotrophs, we generated germline transgenic zebrafish co-expressing red fluorescent protein directed by Prolactin regulatory elements (PRL-RFP) and green fluorescent protein by the Pro-opiomelanocortin promoter (POMC-GFP). Transparent embryos expressing fluorescent markers specifically targeted to lactotrophs and corticotrophs, the two pituitary lineages involved in teleost osmotic adaptation, allowed in vivo dynamic tracing of pituitary ontogeny during altered environmental salinity. Physiological osmotic changes selectively regulate lactotroph but not corticotroph proliferation during early ontogeny. These changes are not suppressed by pharmacological dopamine receptor blockade, but are completely abrogated by morpholino knockdown of the PRL receptor. PRL receptor signaling exerts robust effects on lactotroph development, and plays a permissive role in lactotroph osmo-responsiveness, reflecting the dual peripheral and central interactions required for early pituitary development and embryonic homeostasis.