Phosphatidic acid (PA) is an obligate intermediate in the phosphatidylinositol (PI) cycle and may serve as a sensitive marker for this pathway of reactions. Previously, we have shown that acetylcholine (ACh) stimulates formation of labeled PA in whole rat corneas whose.phospholipids were prelabeled with [14C]arachidonate. To determine which layer of the cornea exhibits the ACh effect, intact epithelium was isolated from the rest of the corneal tissue (designated“stroma/ endothelium”) by incubating rat corneas with neutral protease and then stripping off the epithelium using forceps. The epithelium was ultra-structurally normal and avidly incorporated [14C]arachidonate into phospholipids; the stroma/endothelium had only trace incorporation. [14C]Arachidonyl-PA formation by the epithelium was significantly increased after a 37 second (+58%) and was maximal after a 5.0 minute (+188%) incubation in the presence of 1 mM ACh. The stimulation by ACh was blocked by atropine and scopolamine but not by d-tubocurarine. The epithelium also incorporated significant quantities of [3H]inositol into phosphatidylinositol (PI), phosphatidylinositol monophosphate (PIP), and phosphatidyl-inositol bisphosphate (PIP.). When [3H]inositol-labeled epithelia were incubated for 5 minutes with 1 mM ACh, [3H]inositol monophosphate (IP) was increased 200%, [3H]inositol bisphosphate (IP2) was increased 225%, and [3H]inositol trisphosphate (IP3) was increased 74%. These results suggest that muscarinic cholinergic receptors may be an important regulator of the PI cycle in corneal epithelium and thus may affect intracellular calcium mobilization and epithelial proliferation and regeneration.