Retinoic acid, a derivative of vitamin A, is shown to inhibit the levels of inositol phosphates and diacylglycerol by 25-30% when added to intact HL-60 cells at concentrations which induce differentiation. The onset of inhibition occurs after 10 min and reaches a maximum at 45 min. To study the mechanism and the site of action of retinoic acid, the activity of the phosphatidylinositol bisphosphate-specific phospholipase C was studied in cells permeabilized with streptolysin O and in membrane preparations. Phospholipase C activity was stimulated either via the guanine nucleotide regulatory protein (G-protein) or directly by Ca2+. Retinoic acid treatment, in a time- and concentration-dependent manner, led to a decrease in phospholipase C activity when stimulated with either GTP gamma S or NaF, both of which activate the enzyme via the G-protein. By contrast, it had no effect on the enzyme activity when stimulated with Ca2+ alone. This indicates that retinoic acid interferes with the coupling of the G-protein and phospholipase C. A relationship between the inhibition of phospholipase C activity and the induction of differentiation by retinoic acid was investigated. Only a small inhibition of GTP gamma S-stimulated phospholipase C activity was observed when an analogue of retinoic acid, etretine or Ro10-1670, with low differentiating activity, was used. Moreover, no inhibition of the GTP gamma S-stimulated phospholipase C activity was observed in an HL-60 sub-line resistant to retinoic acid. These results suggest that phospholipase C inhibition is an important step in the induction of differentiation.