Polyphosphoinositide-specific phosphodiesterase (phospholipase C) activity against phosphatidylinositol 4,5-bisphosphate has been examined in disrupted bovine retinal rod outer segments. The enzyme was strictly modulated by free calcium ion concentration and maximally activated at 10(-5) M Ca2+ (91 +/- 4 nmoles phosphatidylinositol 4,5-bisphosphate hydrolyzed/min/mg of protein). Guanine nucleotides did not affect in vitro phospholipase C activity either in the presence or absence of light, carbachol or epinephrine. The pH optimum at 10(-5) M Ca2+ in the presence of sodium deoxycholate was 6.5. The enzyme of bovine rod outer segments was concluded to be indirectly regulated by the phototransduction events.