GH4C1 cells are a clonal strain of rat pituitary tumor cells which synthesize and secrete prolactin and growth hormone. Somatostatin, a hypothalamic tetradecapeptide, inhibits the release of growth hormone and, under certain circumstances, also prolactin from normal pituitary cells. We have prepared [125I-Tyr1]somatostatin (approximately 2200 C1/mmol) and have shown that this ligand binds to a limited number of high affinity sites on GH4C1 cells. Half-maximal binding of somatostatin occurred at a concentration of 6 x 10(-10) M. A maximum of 0.11 pmol of [125I-Tyr1]somatostatin was bound per mg of cell protein, equivalent to 13,000 receptor sites per cell. The rate constant for binding (kon) was 8 x 10(7) M(-1) min(-1). The rate constant for dissociation (koff) was determined by direct measurement to be 0.02 min(-1) both in the presence and absence of excess nonradioactive somatostatin. Binding of [125I-Tyr1]somatostatin was not inhibited by 10(-7) M thyrotropin-releasing hormones. Substance P, neurotensin, luteinizing hormone-releasing hormone, calcitonin, adrenocorticotropin, or insulin. Of seven nonpituitary cell lines tested, none had specific receptors for somatostatin. Somatostatin was shown to inhibit prolactin and growth hormone production by CH4C1 cells. The dose-response characteristics for binding and the biological actions of somatostatin were essentially coincident. Furthermore, among several clonal pituitary cell strains tested, only those which had receptors for somatostatin showed a biological response to the hormone. We conclude that the characterized somatostatin receptor is necessary for the biological actions of somatostatin on GH4C1 cells.