The mechanism of collagenase production by cells derived from rabbit liver was investigated in the present study. Fibroblasts alone, second to fourth passage cells, did not produce collagenase even if PMA, a potent inducer of collagenase production, was added to the culture medium. Collagenase activity was detected only in first passage cells, containing hepatocyte-like and fibroblast-like cells, after the addition of PMA. During 9 days of culture, there was negligible collagenase activity in the first 3 days, but in the following 3 days the activity was 2.54 +/- 0.31 U (mean +/- S.E.M., n = 5) (micrograms of collagen degraded per minute) per milligram of cell protein, and in the final 3 days the activity was 9.05 +/- 0.38 U/mg of cell protein. These results suggest that interaction between mesenchymal and parenchymal cells is important for collagenase production in the liver.