We used a representative of one of the oldest extant vertebrate lineages (jawless fish or agnathans) to investigate the early evolution and function of the growth hormone (GH)/prolactin (PRL) family. We identified a second member of the GH/PRL family in an agnathan, the sea lamprey (Petromyzon marinus). Structural, phylogenetic, and synteny analyses supported the identification of this hormone as prolactin-like (PRL-L), which has led to added insight into the evolution of the GH/PRL family. At least two ancestral genes were present in early vertebrates, which gave rise to distinct GH and PRL-L genes in lamprey. A series of gene duplications, gene losses, and chromosomal rearrangements account for the diversity of GH/PRL-family members in jawed vertebrates. Lamprey PRL-L is produced in the proximal pars distalis of the pituitary and is preferentially bound by the lamprey PRL receptor, whereas lamprey GH is preferentially bound by the lamprey GH receptor. Pituitary PRL-L messenger RNA (mRNA) levels were low in larvae, then increased significantly in mid-metamorphic transformers (stage 3); thereafter, levels subsided in final-stage transformers and metamorphosed juveniles. The abundance of PRL-L mRNA and immunoreactive protein increased in the pituitary of juveniles under hypoosmotic conditions, and treatment with PRL-L blocked seawater-associated inhibition of freshwater ion transporters. These findings clarify the origin and divergence of GH/PRL family genes in early vertebrates and reveal a function of PRL-L in osmoregulation of sea lamprey, comparable to a role of PRLs that is conserved in jawed vertebrates.