BACKGROUND: The three pituitary hormones, viz. prolactin (PRL), growth hormone (GH) and somatolactin (SL), together with the mammalian placental lactogen (PL), constitute a gene family of hormones with similar gene structure and encoded protein sequences. These hormones are believed to have evolved from a common ancestral gene through several rounds of gene duplication and subsequent divergence. PRINCIPAL FINDINGS: In this study, we have identified a new PRL-like gene in non-mammalian vertebrates through bioinformatics and molecular cloning means. Phylogenetic analyses showed that this novel protein is homologous to the previously identified PRL. A receptor transactivation assay further showed that this novel protein could bind to PRL receptor to trigger the downstream post-receptor event, indicating that it is biologically active. In view of its close phylogenetic relationship with PRL and also its ability to activate PRL receptor, we name it as PRL2 and the previously identified PRL as PRL1. All the newly discovered PRL2 sequences possess three conserved disulfide linkages with the exception of the shark PRL2 which has only two. In sharp contrast to the classical PRL1 which is predominantly expressed in the pituitary, PRL2 was found to be mainly expressed in the eye and brain of the zebrafish but not in the pituitary. A largely reduced inner nuclear layer of the retina was observed after morpholino knockdown of zebrafish PRL2, indicating its role on retina development in teleost. SIGNIFICANCE: The discovery of this novel PRL has revitalized our understanding on the evolution of the GH/PRL/SL/PL gene family. Its unique expression and functions in the zebrafish eye also provide a new avenue of research on the neuroendocrine control of retina development in vertebrates.