Rat Kupffer cells stimulated with bacterial lipopolysaccharide (LPS) produced high levels of interleukin 1 (IL-1), determined by assaying the thymocyte proliferating activity. The unstimulated Kupffer cells secreted no detectable activity. LPS-induced production of IL-1 activity was dose-dependent and as little as 0.1 micrograms/ml of LPS induced the IL-1 production. Thirty minutes were required for LPS to induce sufficient amounts of IL-1 activity. IL-2 activity was not detected in the Kupffer cell culture medium. Another soluble agent, N-acetylmuramyl-L-alanyl-D-isoglutamine, or phagocytable agents, silica and zymosan, also stimulated IL-1 production by Kupffer cells, whereas phorbol myristate acetate did not. Kinetic studies revealed a rapid increase in both intra- and extracellular IL-1 activity within 1 hr following the addition of LPS, with a peak at 6 hr. This IL-1 activity produced by Kupffer cells was heat labile, resistant to freezing and thawing and precipitated with 65% ammonium sulfate. Upon gel filtration, the activity was present in three peaks of approximately 110, 35 and 15 kd. The hepatocyte stimulating activity, when assayed by alpha 2-macroglobulin inducing activity, was detected in the first two peaks but not in the third peak. These studies suggest that LAF activity is distinct from hepatocyte stimulating activity at least in the molecular weight.