The discovery could mean treatments are developed to suppress the protein and to stop baldness, although it would not reverse the effects to reverse hair loss.
Tests were carried out on tissue from the scalps of more than 20 men with male pattern baldness, known as androgenic alopecia (AGA).
The results showed bald areas had levels of the protein PGD2 three times higher than hairy areas.
There are already 10 drugs available that can block the receptor that allowed PGD2 to work, which could help researchers develop a treatment in the form of a cream or ointment.
The research, led by Professor George Cotsarelis from the University of Pennsylvania, was published in the journal Science Translational Medicine.
"Our findings should lead directly to new treatments for the most common cause of hair loss in men, AGA," the team said.
"The potential for developing these compounds into topical formulations for treating AGA should elicit great interest moving forward."
Professor Cotsarelis added: "Although a different prostaglandin was known to increase hair growth, our findings were unexpected, as prostaglandins haven't been thought about in relation to hair loss, yet it made sense that there was an inhibitor of hair growth, based on our earlier work looking at hair follicle stem cells."
Future studies are expected to investigate whether a protein inhibitor could also help women with AGA.