Although sulfonylureas have been used extensively in the treatment of non-insulin-dependent (type II) diabetes, controversy exists as to whether these agents act primarily by increasing insulin secretion or by enhancing insulin action. To determine whether sulfonylureas potentiate insulin action in the liver, we evaluated the ability of the sulfonylurea tolazamide to affect insulin-sensitive lipogenesis utilizing primary cultures of hepatocytes prepared from both normal and nonketotic streptozotocin-diabetic rats. Hepatocytes were cultured for 16 h in serum-free media with no additions, tolazamide alone (0.3 mg/ml), or insulin (10(-10) to 10(-7)M) in the absence and presence of tolazamide. Following culture, lipogenesis and specific insulin binding were assessed. Dose-dependent increases in lipogenesis were found in hepatocytes from both normal and diabetic rats after the chronic exposure to insulin. In hepatocytes from diabetic rats, the basal and the maximal insulin-stimulated rates of lipogenesis were only 27% and 13% of normal, respectively, establishing this as a model of hepatic insulin resistance. In the presence of tolazamide, significant potentiation of insulin action was found in hepatocytes from normal and diabetic rats although hepatocytes from diabetic animals remained relatively resistant to insulin when compared with those from nondiabetic animals. While exposure to tolazamide increased insulin responsiveness in both groups of cells, no changes in insulin sensitivity (ED50) were observed. Tolazamide significantly increased insulin binding (12%) in hepatocytes from normal rats cultured in the absence of insulin, but no alterations in insulin binding were found under incubation conditions in which tolazamide potentiated insulin action. These results give the first direct evidence for an insulin-dependent action of a sulfonylurea on the liver from both normal and diabetic rats and indicate that the enhancement of insulin responsiveness occurs through postbinding mechanisms.