The uptake of formaldehyde-treated 125I-labelled human serum albumin in rat hepatocytes and nonparenchymal liver cells was measured in vivo and in vitro. Isolated liver cells were prepared by treating the perfused liver with collagenase. Purified hepatocytes and nonparenchymal cells were obtained by differential centrifugation. Human serum albumin was found to be taken up exclusively or almost exclusively by nonparenchymal cells in vitro and in vivo (after intravenous injection). The maximal rate of human serum albumin-uptake in vitro was comparable to that in vivo. Nonparenchymal cells degraded human serum albumin in vitro as indicated by release of trichloroacetic acid-soluble radioactivity. Degradation started about 20-30 min after addition of human serum albumin to cells and rate of degradation was proportional to rate of uptake. Human serum albumin-degradation could be studied without interference of concurrent uptake by separating cells that had been preincubated with human serum albumin from the medium and then reincubating them with human serum albumin-free medium. The lag phase before human serum albumin-degradation starts and the inhibitory effect of chloroquine on degradation indicate that human serum albumin is degraded in lysosomes. The data obtained show that enzymatically prepared nonparenchymal liver cells retain their endocytic activity in vitro. Denatured human serum albumin should be useful both as a marker for rat liver macrophages and for the study of intracellular proteolysis in these cells.