The effect of guanine nucleotides on platelet and calf brain cytosolic phospholipase C was examined in the absence of membranes or detergents in an assay using labeled lipid vesicles. Guanine nucleotides stimulate hydrolysis of [3H]phosphatidylinositol 4,5-bisphosphate [( 3H]PtdIns-4,5-P2) catalyzed both by enzyme from human platelets and by partially purified enzyme from calf brain. Guanosine 5'-O-(3-thiotriphosphate) (GTP gamma S) was the most potent guanine nucleotide with a half-maximal stimulation at 1-10 microM, followed by guanosine 5'-(beta, gamma-imido)triphosphate greater than GTP greater than GDP = guanosine 5'-O-(2-thiodiphosphate). Guanosine 5'-O-(2-thiodiphosphate) was able to reverse the GTP gamma S-mediated stimulation. NaF also stimulated phospholipase C activity, further implying a role for a guanine nucleotide-binding protein. In the presence of GTP gamma S, the enzyme cleaved PtdIns-4,5-P2 at higher pH values, and the need for calcium ions was reduced 100-fold. The stimulation of PtdIns-4,5-P2 hydrolysis by GTP gamma S ranged from 2 to 25-fold under various conditions, whereas hydrolysis of [3H]phosphatidylinositol was only slightly affected by guanine nucleotides. We propose that a soluble guanine nucleotide-dependent protein activates phospholipase C to hydrolyze its initial substrate in the sequence of phosphoinositide-derived messenger generation.