Since its introduction in 1969, the high-yield preparation of isolated hepatocytes has become a frequently used tool for the study of hepatic uptake, excretion, metabolism and toxicity of drugs and other xenobiotics. Basic preparative methods are now firmly established involving perfusion of the liver with a balanced-saline solution containing collagenase. Satisfactory procedures are available for determining cell yields, for expressing cellular activities and for establishing optimal incubation conditions. Gross cellular damage can be detected by means of trypan blue or by measuring enzyme leakage, and damaged cells can be removed from the preparation. Specialized techniques are available for preparing hepatocyte couplets and suspensions enriched with periportal or perivenous hepatocytes. The isolated hepatocyte preparation is particularly convenient for the study of the kinetics of hepatic drug uptake and excretion because the cells can be rapidly separated from the incubation medium. Isolated liver cells have also proved valuable for investigating drug metabolism since they show many of the features of the intact liver. However, they also show important differences such as losses of membrane specialization, some degree of cell polarity and the capacity to form bile. The many consequences of the hepatic toxicity of xenobiotics including lipid peroxidation, free radical formation, glutathione depletion, and covalent binding to macromolecules are also readily studied with the isolated liver cell preparation. A particular advantage is the ease with which morphological changes as a result of drug exposure can be observed in isolated hepatocytes. However, it must be remembered that the isolation procedure inevitably introduces changes that may make the cells more susceptible than the normal liver to damage by xenobiotic agents. Despite its limitations, the isolated hepatocyte preparation is now firmly established in the armamentarium of the investigator examining the interaction of the liver with xenobiotics.