1. In isolated hepatocytes prelabelled with [14C]-arachidonic, -stearic, -linoleic, -oleic or -palmitic acids, vasopressin increased the amount of radioactivity present in diacylglycerols. The largest increase was observed in cells labelled with arachidonic or stearic acids. 2. In cells prelabelled with [14C]- or [3H]-arachidonic acid, the onset of the increase in radioactivity in diacylglycerols induced by vasopressin was slow, the increase was partly dependent on the presence of extracellular Ca2+, and was associated with an increase in radioactivity present in phosphatidic acid which was more rapid in onset. Vasopressin decreased the amount of [3H]arachidonyl-phosphatidylinositol 4,5-bisphosphate, but the magnitude of this decrease was less than 10% of the observed increase in radioactivity in [3H]arachidonyl-diacylglycerol. 3. The concentration of vasopressin which gave half-maximal increase in [14C]arachidonyl-diacylglycerol at low extracellular Ca2+ was 10-fold higher than that which gave half-maximal stimulation of 45Ca2+ efflux. Phenylephrine, but not glucagon, also increased the amount of [14C]arachidonyl-diacylglycerol. 4. It is concluded that an early action of vasopressin on the liver cell is to increase the flux of carbon from phospholipids, including the phosphoinositides, to diacylglycerols.