The impairment of biliary excretory function induced by E. coli endotoxin in the isolated perfused rat liver was studied by investigating its effects on canalicular bile formation. In experiments where no bile salt was infused, endotoxin administration resulted in significant decreases in bile salt-independent bile flow (BSIF) and sulfobromophthalein (BSP) excretion. It also caused dose-dependent decreases in the transport maximum of BSP but did not alter the ability of the liver to concentrate BSP in the bile. At 2 mg./100 ml. it decreased the hepatic removal rate but increased the hepatic storage of the dye. Measurement of 14 C-erythritol clearance and bile salt secretion also revealed that endotoxin significantly reduced the BSIF fraction of bile. The results indicated that the primary effects of endotoxin were on BSIF and BSP excretion.