Hepatocytes isolated from woodchucks (Marmota monax) were shown to produce nitrite in vitro from L-arginine after stimulation with lipopolysaccharide (LPS). Hepatocytes isolated from woodchucks that were chronic carriers of woodchuck hepatitis virus formed twice as much nitrite as hepatocytes from noninfected animals. Nitrite synthesis by hepatocytes was directly related to L-arginine and LPS concentrations in the tissue culture medium and reached a plateau at 0.5 mM L-arginine and 1.0 micrograms/ml LPS. LPS-stimulated hepatocytes nitrosated morpholine to form N-nitrosomorpholine in the presence of L-arginine at a physiological pH of 7.4. There was a 10-fold increase in N-nitrosomorpholine production when hepatocytes were stimulated with LPS compared to unstimulated hepatocytes under similar conditions when both nitrite and morpholine were directly added to the medium. NG-monomethyl-L-arginine, a selective inhibitor of nitric oxide synthase, inhibited formation of both nitrite and N-nitrosomorpholine. These results demonstrate that nitrosating agents are formed in hepatocytes via the L-arginine-nitric oxide pathway. This suggests that endogenous formation of carcinogenic N-nitroso compounds could influence the process of hepatocarcinogenesis in woodchucks with chronic woodchuck hepatitis virus infection.