Melatonin, the principal hormone of the vertebrate pineal gland, has been implicated in a variety of neurobiological processes such as circadian rhythmicity and reproductive function. One of the earliest described actions of melatonin was its ability to cause pigment translocation in the dermal melanophores of amphibians. Melatonin binding sites have been identified in the brain of many species and in pigmented tumour cell lines; however, the dermal melanophores of the frog Xenopus Laevis possess the highest known density of melatonin binding sites. These cells are the source from which a melatonin receptor has been cloned and provide an excellent model to study melatonin-mediated signal transduction in an isolated cell system. In Xenopus melanophores, melatonin induces a rapid perinuclear aggregation of intracellular pigment which is associated with a pertussis toxin-sensitive inhibition of cAMP. We have previously demonstrated that a subtype of melatonin binding sites found in selected regions of the pigeon brain and in Syrian Hamster RPMI 1846 melatonin cells are functionally coupled to phosphoinositide hydrolysis as a second messenger. Here we now present evidence to suggest that Xenopus Laevis melanophores also possess melatonin binding sites which are functionally linked to phosphoinositide hydrolysis. Melatonin agonists induced phosphoinositide hydrolysis in melanophores in a concentration-dependent manner with a rank order of potency of 2-iodomelatonin > 6-chloromelatonin > N-acetylserotonin > melatonin. Stimulatory response of 2-iodomelatonin was blocked by the melatonin antagonist N-acetyltryptamine and the alpha-adrenergic antagonist prazosin, which has been shown to have high affinity for melatonin binding sites. Phosphoinositide hydrolysis induced by melatonin agonists was not blocked by the serotonin antagonist ketanserin or by phentolamine, an alpha-adrenergic antagonist, indicating that the response observed was not due to stimulation of 5-HT2a/2c receptors or alpha-adrenergic receptors. Furthermore, incubation of melanophores with the non-hydrolyzable G-protein source GTP-gamma-S attenuated the phosphoinositide dose response induced by 2-iodomelatonin, and pre-incubation of the cells with pertussis toxin had no effect on 2-iodomelatonin-induced phosphoinositide hydrolysis. The present data suggest that Xenopus Laevis Melanophores possess G-protein linked pertussis toxin-insensitive melatonin binding sites which are functionally coupled to phosphoinositide hydrolysis as a signal transduction mechanism.