Primary cultures of mouse embryo palate mesenchyme cells were incubated with [3H]arachidonic acid and [14C]stearic acid in order to radiolabel their lipids. The cells were then washed, collected by centrifugation, and homogenized. Incubation of the homogenates under various conditions revealed that deoxycholate inhibited phospholipase A activity and stimulated a phospholipase C activity in these cells which preferentially degraded phosphatidylinositol (PI) compared to phosphatidylcholine (PC), -ethanolamine (PE), and -serine (PS). Expression of this phospholipase C (E.C. 3.1.4.10) activity was dependent on Ca2+ and had a pH optimum of no more than 7.0-7.5. Centrifugation of the homogenates at 105,000g for 30 min produced a membranous fraction that contained phospholipase C activity with characteristics similar to those of the enzyme found in the supernatant. Such a dual distribution of this enzyme may reflect that mouse embryo palate mesenchyme cells are neural crest in origin.