T he action of vasopressin (AVP) in transporting epithelia is mediated by cyclic AMP(cAMP), whereas its effects in hepatocytes are mediated by calcium and phosphoinositides. Based on our recent observation that AVP stimulates phosphoinositide turnover in toad bladder, we examined the role of calcium-phospholipid-dependent kinase (protein kinase C) as a modulator of AVP's hydroosmotic effect. Phorbol myristate acetate (PMA), which can substitute for diglyceride as an activator of protein kinase C, the diglyceride dioctanoylglycerol, and RHC-80267, a glyceride lipase inhibitor that should increase diglyceride levels, inhibited AVP-stimulated water flow, but not water flow stimulated by cAMP, suggesting inhibition of cyclic AMP production. Both the dioctanoylglycerol and RHC-80267, but not PMA, also decreased water flow in response to 8-bromo cAMP indicating a potential inhibition at post-cAMP events as well. PMA increased prostaglandin synthesis; however, inhibition of water flow persisted even when prostaglandin synthesis was completely blocked by incubation with naproxen. Furthermore, water flow was not inhibited by incubation with the inactive diglyceride substitute phorbol didecanoate, supporting the specificity of the PMA inhibition. Consistent with the site of action at adenylate cyclase suggested by the transport experiments, PMA and RHC-80237 decreased both cell cAMP content and the cyclic AMP-dependent kinase ratio (-cAMP/+cAMP), an index of intracellular cyclic AMP effect. Assay for protein kinase C activity in toad bladder epithelial cell supernatant demonstrated that the toad bladder indeed contains a kinase stimulable by phospholipid, calcium, and PMA. As an apparently independent effect, we found that addition of PMA, but not dioctanoylglycerol or RHC-80267, to the mucosal bath increased both water permeability and the frequency of granular cell luminal membrane aggregates in the absence of vasopressin, consistent with stimulation of fusion events at the luminal membrane. Our data suggest that protein kinase C can modulate AVP-stimulated water flow in toad bladder by inhibiting cAMP generation, and perhaps post-cAMP steps as well, and support the hypothesis that AVP-stimulated turnover of membrane phosphoinositides antagonize the effects of AVP via changes in diglyceride, calcium, and protein kinase C.