Many hormones, neurotransmitters, and secretagogues act by increasing the intracellular free Ca2+ concentration in target cells. The initial event following binding of agonists to specific receptors in the plasma membrane involves a receptor-mediated activation of a guanosine nucleotide-binding protein (G protein), which induces a Ca2+-independent activation of phospholipase C. This novel, presently uncharacterized G protein is inactivated by pertussis toxin-catalyzed adenosine 5'-diphosphate ribosylation in some but not all cell types. Phospholipase C catalyzes the breakdown of inositol lipids, notably phosphatidylinositol 4,5-bisphosphate, with the production of inositol phosphates and 1,2-diacylglycerol. Inositol 1,4,5-trisphosphate (IP3) is responsible for a rapid mobilization of intracellular Ca2+ by activating Ca2+ efflux from a subpopulation of the endoplasmic reticulum. The properties of this process are consistent with its being a ligand-activated ion channel with electrogenic Ca2+ efflux being charge-compensated by K+ influx. Sustained hormonal responses require extracellular Ca2+ and a prolonged elevation of the cytosolic free Ca2+. This is brought about by hormone-mediated changes of Ca2+ flux across the plasma membrane involving both an inhibition of Ca2+ efflux and an activation of Ca2+ influx. This review summarizes recent findings concerning the role of G proteins in receptor coupling to phospholipase C; the regulation of enzymes of phosphoinositide metabolism; the evidence for IP3 being a Ca2+-mobilizing second messenger and its mechanism of action; the formation of new inositol phosphates and their possible significance; the relation of intracellular Ca2+ mobilization and plasma membrane Ca2+ fluxes to the kinetics of the hormone-induced cytosolic free Ca2+ transient; and the possible roles of protein kinase C in influencing the hormone-mediated functional response.