Gluconeogenesis from (U-14C)-lactate occurred in hepatocytes prepared from term fetuses which lack cytosolic phosphoenolpyruvate carboxykinase and was almost completely inhibited by 3-mercaptopicolinate but was relatively insensitive to amino-oxyacetate. 12 h after birth when up to 32% of the total hepatic phosphoenolpyruvate carboxykinase activity was detectable in the cytosol, glucose synthesis was increased 4.4-fold in hepatocytes from fasted neonates and was partially (37%) sensitive to amino-oxyacetate. In livers of fasted 24-hour-old neonates total phosphoenolpyruvate carboxykinase activity was distributed between the mitochondria and the cytosol in the ratio of 60:40. In hepatocytes prepared from such animals, amino-oxyacetate inhibited glucose synthesis by about 56%, suggesting that up to half of the carbon flow from lactate to glucose was via the formation of phosphoenolpyruvate in the mitochondria. These studies indicate an important role for mitochondrial phosphoenolpyruvate carboxykinase in neonatal gluconeogenesis.