Freshly prepared rat hepatocytes isolated by perfusion with collagenase were able to metabolize microM concentrations of dimethylnitrosamine to a methylating agent. The methylation of hepatocyte DNA in this system was complete within 2 hr, and after this time, the content of O6-methylguanine in the DNA declined, showing that the repair system for this product was active in the isolated hepatocytes. When extracellular calf thymus DNA was added to the incubated hepatocytes, this also became methylated. Methylation of this DNA was not due to cell lysis releasing activating enzymes into the medium, showing that the methylating species formed by the hepatocytes from dimethylnitrosamine is sufficiency stable to pass out of the cell in substantial amounts. These results support the possibility that alkylation of liver cells would not be confined to those cells metabolizing dimethylnitrosamine but could be extended to those cells which are in close proximity to the activating cells. These cells could include nonparenchymal cells which are known to be targets for the carcinogenic action of dimethylnitrosamine.