To understand the effects of acetylcholine (ACh) on fluid-absorbing epithelia, we carried out experiments on Necturus gallbladder epithelium. Binding studies with 1-quinuclidinyl[phenyl-4(N)-3H]benzilate (QNB) demonstrated that Necturus gallbladder epithelial cells express high-affinity muscarinic receptors. The effects of ACh and carbachol were exerted from the basolateral surface and consisted of a transient hyperpolarization of both cell membranes and a concomitant decrease in the apparent fractional resistance of the apical membrane. Atropine blocked both effects. ACh also elicited transient elevations of inositol 1,4,5-trisphosphate and intracellular free calcium ([Ca2+]i) levels, the latter by both release from intracellular stores and basolateral influx. The phospholipase C antagonist U-73122 inhibited the effects of ACh, whereas inhibition of prostaglandin and guanosine 3',5'-cyclic monophosphate synthesis with indomethacin or methylene blue, respectively, had no effect. In conclusion, Necturus gallbladder epithelium expresses muscarinic receptors in the basolateral membrane. Receptor activation stimulates phospholipase C and elevates cellular levels of inositol 1,4,5-trisphosphate and [Ca2+]i. The elevation in [Ca2+]i activates K+ channels but apparently not Cl- channels.