Parenchymal and nonparenchymal cells were isolated from perfused rat livers and incubated at 37 degrees C in the absence and presence of ethanol (50 mM). 1. Nonparenchymal cells prepared by means of centrifugation showed a higher rate of incorporation of L-[U-14C]valine into protein than nonparenchymal cells prepared by means of pronase. Cells prepared by the former method were used for further studies. 2. Protein degradation was present in suspensions of both parenchymal and nonparenchymal cells evidenced by increasing levels of branched amino acids in the intracellular and extracellular compartment during cell incubation. 3. The rate of cellular protein synthesis (corrected for precursor pool specific radioactivity) was of the same order of magnitude in nonparenchymal and parenchymal cells when expressed as nmol valine incorporated per mg protein. This rate was also close to the value found in intact liver by other workers. 4. Approximately 25% of the total radioactivity incorporated during incubation for 2 h was found in proteins released to the medium from parenchymal cells, while the corresponding figure for nonparenchymal cells was 3.5%. 5. Ethanol inhibited incorporation of labelled valine into stationary and medium proteins of parenchymal cells. No such effects were found in nonparenchymal cells. 6. Nonparenchymal cells did not metabolize ethanol while parenchymal cells did, shown by changes in lactate/pyruvate ratio and medium pH. It was concluded that nonparenchymal cells are capable of synthesizing proteins at a rate comparable to that found in parenchymal cells. Protein synthesis in parenchymal cells was inhibited by ethanol, but nonparenchymal protein synthesis was unaffected. This difference may be linked to the ability of the former cell type to metabolize ethanol.