Dopamine causes a significant retraction of neurites of bull-head catfish horizontal cells maintained in culture. The effects of dopamine are blocked by haloperidol and SCH 23390, a D1 antagonist, but not by sulpiride, a D2 antagonist. The dopamine-induced morphological changes were mimicked by SKF 38393, a D1 agonist, but not by quinpirole, a D2 agonist. Kainate also caused process retraction, but other neuroactive substances tested including glutamate, 5-hydroxytryptamine, N-methyl-D-aspartate, gamma-aminobutyric acid, and glycine caused only minor changes in neurite length. Cyclic AMP analogues do not induce neurite retraction in horizontal cells, indicating that this effect of dopamine is not mediated by cyclic AMP. However, a protein kinase C activator (phorbol 12-myristate 13-acetate) and synthetic diacylglycerol analogs (1-oleoyl-2-acetyl-sn-glycerol and dioctanoglycerol) caused marked neurite retraction. Their effects, as well as the dopamine-induced changes, were blocked by staurosporine, a potent protein kinase antagonist. The results suggest that dopamine causes neurite retraction by the activation of protein kinase C via diacylglycerol.