Many receptors for hormones, neurotransmitters and other signals cause hydrolysis of phosphatidylinositol 4,5-bisphosphate (PtdIns(4,5)P2) and effect a rise in cytosolic Ca2+ concentration. The inositol 1,4,5-trisphosphate (Ins(1,4,5)P3) liberated during PtdIns(4,5)P2 breakdown seems to serve as a second messenger that activates the release of Ca2+ from a nonmitochondrial intracellular compartment. As expected if it is an important intracellular messenger, Ins(1,4,5)P3 is relatively rapidly degraded, both within stimulated cells and when added to homogenates of blowfly salivary gland or to permeabilized, but not intact, hepatocytes. Here we report that the dephosphorylation reactions responsible for the conversion of Ins(1,4,5)P3 to free inositol in rat liver are catalysed by two or more enzymes, and that these reactions are distributed between the plasma membrane and cytosol. The Ins(1,4,5)P3 5-phosphatase and inositol 1-phosphate (Ins(1)P) phosphatase of liver appear similar to enzymes described previously in erythrocytes and brain.