Stat5, a member of the signal transducer and activators of transcription (Stat) protein family, is a primary mediator of prolactin (PRL) signaling in the mammary gland. There are two distinct Stat5 genes, Stat5a and Stat5b. The Stat5a isoform has been demonstrated to have an essential role in mammary epithelial differentiation, whereas Stat5b is required for dimorphic sexual growth. To search for proteins that interact with the C terminus of Stat5a, a highly divergent region amongst Stat family members, we performed a yeast two-hybrid screen of HBL100 and primary breast adenocarcinoma libraries. This led to the identification of a protein that had previously been isolated as a centrosomal P4.1-associated protein (CPAP). CPAP was shown to specifically interact with Stat5a and Stat5b but not with Stat1 or Stat3. Both the tyrosine phosphorylated and unphosphorylated forms of Stat5, as well as Stat5a/Stat5b heterodimers, could associate with CPAP. CPAP was expressed in human breast cancer cell lines and the developing mammary gland as well as in other tissues. Indirect immunofluorescence and cellular fractionation studies revealed that CPAP was predominantly cytoplasmic, with low levels in the nucleus. Nuclear levels of CPAP increased substantially upon activation of the PRL pathway, most likely reflecting cotranslocation of this protein with activated Stat5. Furthermore, CPAP was found to augment Stat5-mediated transcription. Thus, we have identified CPAP as a novel coactivator of Stat5 proteins in the PRL (and probably other) pathways.