When mouse pancreatic "minilobules" prelabeled with either [14C]arachidonic acid (AA), [14C]stearic acid (SA), or [3H]glycerol were stimulated with the secretogogue, caerulein, there was a 60-70% loss in radioactivity in phosphatidylinositol (PI) at 30 min. This loss was accompanied by the formation of [14C] phosphatidic acid (PA), [14C]diacylglycerol (DG), [14C] triacylglycerol (TG), and free [14C]AA, [14C]SA, and [3H]glycerol. The loss in radioactive PI was the same as the loss in chemically measured PI-phosphorus. Thirty to fifty per cent of the caerulein-induced loss of prelabeled PI could be accounted for as free [14C]AA, [14C]SA, or [3H]glycerol. Increased incorporation of fatty acid or glycerol residues into DG, PA, and TG accounted for the balance of the loss in PI. The specific DG-lipase inhibitor, RHC 80267, markedly inhibited the caerulein-stimulated release of [14C]AA, [14C]SA, and [3H]glycerol and roughly doubled the caerulein-induced increment in [14C]AA-, [14C]SA-, or [3H]glycerol-labeled DG, showing that the source of the caerulein-induced increment in fatty acids and glycerol was DG. When the PI was prelabeled with either [32P] orthophosphate, [3H]myoinositol, or [3H]glycerol, only 1% or less of the radioactivity in PI was in lysophosphatidylinositol (LPI), and there was no increase in radioactivity in LPI on stimulation with caerulein. These observations, taken together, argue strongly for a phospholipase C-catalyzed breakdown of PI followed by DG-lipase and argue against any significant involvement of phospholipase A2 in PI degradation in mouse pancreas. The formation of substantial amounts of free [14C]AA on stimulation supports the view that, among other things, the phosphoinositide effect in the exocrine pancreas serves to generate arachidonate (and its metabolites). The release of appreciable amounts of free fatty acids and glycerol shows that a significant portion of the DG formed as a result of caerulein-stimulated PI breakdown is not conserved in the phosphoinositide cycle.