The activity of a phosphodiesterase of the phospholipase C (PLC) type and factors influencing its activity were studied in ascites tumor cells. The enzyme confined to the 12 000 x g particulate fraction hydrolyses inositol phospholipids, with preference for phosphatidylinositol 4-phosphate (PtdIns(4)P) over phosphatidylinositol 4,5-bisphosphate (PtdIns(4,5)P2), exhibiting maximum values of 61 and 15 nmol/min per mg protein, respectively, at a pH optimum of 5.5. The phosphodiesterase, which is strongly Ca2+ dependent with optimal free Ca2+ concentrations between 20 and 100 nM for both substrates, is almost completely inhibited (93-95%) in the presence of 2 mM EGTA. Only the PLC acting on PtdIns(4,5)P2 is significantly activated in the presence of 6-60 muM GTPgammaS. The low extent of enzymatic activity in the presence of 5 mM MgCl2 or chelating agents is suggestive of inositolphosphatase activity which is supported by the determination of small amounts of myo-inositol during HPLC analyses. Both dioleoylglycerol (DAG) and the membrane-permeable 1-oleoyl-2-acetyl-sn-glycerol (OAG) inhibit PLC activity, exhibiting IC50 values of 5 muM with PtdIns(4)P and approx. 10 muM with PtdIns(4,5)P2 as substrate and maximum inhibition up to 60% (DAG) and 80% (OAG). These data are indicative of a mechanism of direct negative feedback regulation of the enzyme by diglycerides which may explain the observed long-term effects of OAG on PLC activity in cell culture experiments.