This study was undertaken to investigate the effect of experimental type 2 diabetes in the rat on the insulin and glucagon receptors and on the early steps of glucagon action. The binding of insulin and glucagon and the glucagon-stimulated cyclic AMP accumulation in the presence of a phosphodiesterase inhibitor (IBMX, 0.1 mmoles/l) were studied in liver cells isolated from 7-9-month-old rats with chronic type 2 diabetes and from control rats. No significant change was observed in [125I] insulin binding and [125I]glucagon binding of diabetic liver cells as compared to controls. Scatchard analysis of the competition experiments indicated that affinity and number of insulin and glucagon receptors were not significantly changed in the liver cells of diabetic rats. The basal cyclic AMP level was significantly lower in the diabetic hepatocytes (2.3 +/- 0.9 pmoles/10(6) cells) than in the controls (4.0 +/- 0.6 pmoles/10(6) cells). Cyclic AMP response to physiological concentrations of glucagon (0.1-1 nmoles/l) was about 2 times lower in the diabetic hepatocytes than in the controls. Furthermore, the basal liver membrane adenylate cyclase activity and the fluoride-activatable adenylate cyclase activity were about 2 times lower in the diabetics as compared to control rats, while the liver cyclic AMP and cyclic GMP phosphodiesterase activities were unchanged. The ability of glucagon to stimulate liver membrane adenylate cyclase over a 10(-12)-10(-6) M concentration range was decreased in diabetic rats. Taken together, these data are consistent with the thesis that the impairment of the liver cyclic AMP response to glucagon in rats with type 2 diabetes is caused by a decrease in the amount of adenylate cyclase in the liver plasma membranes.