In addition to its peripheral actions, oxytocin released within the brain is important for birth and essential for milk ejection. The oxytocinase enzyme (placental leucine aminopeptidase; P-LAP) is expressed both peripherally and centrally. P-LAP controls oxytocin degradation in the uterus, placenta and plasma during pregnancy, although its role in the hypothalamus is unclear. We investigated P-LAP expression and activity in the hypothalamus in virgin, pregnant and lactating rats, as well as its role in vivo during the milk-ejection reflex. P-LAP mRNA and protein were expressed in magnocellular neurones of the supraoptic (SON) and paraventricular (PVN) nuclei. Oxytocin neurones co-expressed P-LAP without strong subcellular co-localisation of oxytocin and P-LAP, indicating that they are packaged in separate vesicles. Examination of the intracellular distribution of oxytocin and P-LAP showed a redistribution of P-LAP to within 1 μm of the plasma membrane in the somata of oxytocin neurones during lactation. Both P-LAP mRNA expression and hypothalamic leucyl/cystinyl aminopeptidase activity in the soluble fraction were higher during lactation than in late pregnant or virgin states. Inhibition of central enzyme activity by i.c.v. injection of amastatin in anaesthetised suckling mothers increased the frequency of reflex milk ejections. Because hypothalamic P-LAP expression and activity increase in lactation, and the prevention of its action mimics central oxytocin administration, we conclude that P-LAP regulates auto-excitatory oxytocin actions during the suckling-induced milk-ejection reflex.