Interaction of tumor promoting phorbol esters with specific high affinity receptors is probably essential for many of the biological responses elicited by these agents. Since diacylglycerols which can be produced enzymatically from phospholipids by phospholipase C are postulated to be the physiological ligands for the phorbol ester receptor, we have examined primary cultures of mouse epidermal basal cells exposed to phospholipase C (Clostridium perfringens) for several biological and biochemical responses characteristic of treatment with 12-O-tetradecanoylphorbol-13-acetate, the most potent phorbol ester tumor promoter. Formation of diacylglycerols by treatment with phospholipase C was demonstrated by the dose-dependent release of radioactive diacylglycerols in cells prelabeled with [3H]arachidonic acid. Treatment with phospholipase C at 0.05 units/ml for 30 min led to the morphological changes and to the reduction in epidermal growth factor binding (90%) associated with 12-O-tetradecanoylphorbol-13-acetate treatment. Continuous treatment at the same dose led to the induction of the enzymes omithine decarboxylase and transglutaminase with a time course and extent similar to the inductions by 12-O-tetradecanoylphorbol-13-acetate. Treatment with phospholipase C at 0.1 enzyme unit/ml yielded substantial suppression of the binding affinity of phorbol-12,13-dibutyrate for its receptors without reduction in total number of binding sites, consistent with the production by phospholipase C of a competitive inhibitor of phorbol ester binding. Several diacylglycerols at concentrations of 250 µm and above effectively competed for phorbol-12,13-dibutyrate binding, reduced epidermal growth factor binding, and to a lesser extent induced omithine decarboxylase and transglutaminase. These results support the hypothesis that diacylglycerols can act through the phorbol ester receptors and thus produce biological and biochemical responses similar to those of the phorbol esters.