The clone C2 derived from a rat hepatoma cell line was used to investigate the mechanism of the induction of gamma-glutamyltransferase by ethanol. gamma-glutamyltransferase activity was detected in the C2 cell (1.4 mU per mg protein), and its kinetic properties were similar to normal rat liver gamma-glutamyltransferase. Ethanol provoked a dose- and time-dependent increase in gamma-glutamyltransferase activity, the maximum (2- to 3-fold) occurring 48 hr after the addition of ethanol (180 mM). In contrast, the activity of five other enzymes tested were not markedly modified by ethanol. Propanol was more potent than ethanol in inducing gamma-glutamyltransferase (5-fold stimulation), whereas methanol had no effect. The release of the enzyme in the medium was increased by ethanol and propanol. Several observations argue in favor of an increase in the biosynthesis of gamma-glutamyltransferase after ethanol addition: (i) ethanol increased the maximal velocity of the enzyme and did not modify the affinity for its substrates. It did not alter gamma-glutamyltransferase subcellular distribution; (ii) ethanol had no immediate effect when added directly to the assay mixture; (iii) the lag period and the time course of the increase in gamma-glutamyltransferase activity were those expected for an induction process; (iv) the increase in gamma-glutamyltransferase activity was prevented by cycloheximide and actinomycin D suggesting that ethanol acted at the transcriptional level. The effect of ethanol was not mimicked by acetaldehyde. In conclusion, we have demonstrated that ethanol increases the biosynthesis of gamma-glutamyltransferase in a rat hepatoma cell line which provides a new in vitro system.