W hen 125I-glucagon is incubated with freshly isolated rat hepatocytes and studied by quantitative electron microscope autoradiography, the labeled material localizes to the plasma membrane of the cell at early times of incubation of 20 degrees C; at later times of incubation at 20 degrees C, there is little further translocation of the labeled ligand. When incubations are carried out at 37 degrees C, the labeled material is progressively internalized by the cell after a brief delay. When the internalized radioactivity is further analyzed, it is found to associate preferentially with lysosome-like structures. When the cell-associated radioactivity is extracted, there is degradation of the ligand in incubations carried out at 37 degrees C. The events involved in the interaction of 125I-glucagon with the hepatocyte are similar to those previously described for labeled insulin in this cell. The process of binding, internalization, and lysosomal association appears to be a general process related to many polypeptide hormones and growth factors, and may represent the mechanism by which the specific binding of the ligand to the cell surface mediates the degradation of the ligand and the loss of its surface receptor.