H2O2 mimicked the action of periportal pO2 in the modulation by O2 of the glucagon-dependent activation of the phosphoenolpyruvate carboxykinase (PCK) gene and the insulin-dependent activation of the glucokinase (GK) gene. H2O2 can be converted in the presence of Fe2+ in a Fenton reaction into hydroxyl anions and hydroxyl radicals (.OH). The hydroxyl radicals are highly reactive and might interfere locally with transcription factors. It was the aim of the present study to investigate the role of and to localize such a Fenton reaction. Hepatocytes cultured for 24 h were treated under conditions mimicking periportal or perivenous pO2 with glucagon or insulin plus the iron chelator desferrioxamine (DSF) or the hydroxyl radical scavenger dimethylthiourea (DMTU) to inhibit the Fenton reaction. PCK mRNA was induced by glucagon maximally under conditions of periportal pO2 and half-maximally under venous pO2. GK mRNA was induced by insulin with reciprocal modulation by O2. DSF and DMTU reduced the induction of PCK mRNA to about half-maximal and increased the induction of GK mRNA to maximal under both O2 tensions. Hydroxyl radical formation was maximal under arterial pO2. Perivenous pO2, DSF and DMTU each decreased the formation of .OH to about 70% of control. The Fenton reaction could be localized in a perinuclear space by confocal laser microscopy and three-dimensional reconstruction techniques. In the same compartment, iron could be detected by electron-probe X-ray microanalysis. Thus a local Fenton reaction is involved in the O2 signalling, which modulated the glucagon- and insulin-dependent PCK gene and GK gene activation.