The effect of arachidonic acid (AA) on the activity of diacylglycerol (DG) kinase in neural membranes was investigated. When rat brain cortical membranes were incubated with 0.5 mM dipalmitin and [gamma-32P]ATP, formation of phosphatidic acid (PA) was observed. It was linear up to 5 min, and the initial rate was approximately 1.0 nmol/min/mg of protein. The DG kinase activity was stimulated twofold by 0.25 mM AA. The stimulation was apparent at the earliest time point measured (1 min) and with the lowest concentration of AA tested (62.5 microM). The stimulation was proportional to the concentration of AA up to 250 microM. AA was the most potent stimulator of DG kinase, and linolenic acid showed approximately 40% stimulation. Oleic acid showed no effect, whereas linoleic and the saturated fatty acids tested were inhibitory. AA stimulation of DG kinase was observed only with membranes of cerebrum, cerebellum, and myelin and not with brain cytosol or liver membranes. AA also stimulated the formation of PA in the absence of added dipalmitin (endogenous activity) with membranes prepared from whole brain. DG kinase of neural membranes was extracted with 2 M NaCl, which on dialysis yielded a precipitate. Both the precipitate and the supernatant showed DG kinase activity, but only the enzyme in the precipitate was stimulated by AA at concentrations as low as 25 microM. It is suggested that AA, through its effect on DG kinase, regulates the level of DG in neural membranes, which in turn regulates protein kinase C activity.