Goat milk is rich in various fatty acids that are beneficial to human health. Chromatin immunoprecipitation followed by sequencing (ChIP-seq) and RNA-seq analyses of goat mammary glands at different lactation stages revealed a novel lactation regulatory factor, Prospero homeobox 1 (PROX1). However, the mechanism whereby PROX1 regulates lipid metabolism in dairy goats remains unclear. We found that PROX1 exhibits the highest expression level during peak lactation period. PROX1 knockdown enhanced the expression of genes related to de novo fatty acid synthesis (e.g., SREBP1 and FASN) and triacylglycerol (TAG) synthesis (e.g., DGAT1 and GPAM) in goat mammary epithelial cells (GMECs). Consistently, intracellular TAG and lipid droplet contents were significantly increased in PROX1 knockdown cells and reduced in PROX1 overexpression cells, and we observed similar results in PROX1 knockout mice. Following PROX1 overexpression, RNA-seq showed a significant upregulation of peroxisome proliferator-activated receptor gamma coactivator-1 alpha (PPARGC1A) expression. Further, PPARGC1A knockdown attenuated the inhibitory effects of PROX1 on TAG contents and lipid-droplet formation in GMECs. Moreover, we found that PROX1 promoted PPARGC1A transcription via the PROX1 binding sites (PBSs) located in the PPARGC1A promoter. These results suggest a novel target for manipulating the goat milk-fat composition and improving the quality of goat milk.