The ability of muscarinic receptors, present in either the cell surface or sequestered compartments of intact human SK-N-SH neuroblastoma cells, to stimulate phosphoinositide hydrolysis has been examined. When cells were first exposed to carbachol for 1 h at 37 degrees C, approximately 50% of the cell surface receptors became sequestered, and this was accompanied by a comparable reduction in the subsequent ability of muscarinic agonists to stimulate phosphoinositide turnover, as monitored by the release of labeled inositol phosphates at 10 degrees C. At this temperature, muscarinic receptor cycling between the two cell compartments is prevented. Upon warming the carbachol-pretreated cells to 37 degrees C, receptor cycling is reinitiated and stimulated phosphoinositide turnover is fully restored within 5-8 min. When measured at 10 degrees C, the reduction of stimulated phosphoinositide turnover observed following carbachol pretreatment was similar in magnitude for both hydrophilic (carbachol, oxotremorine-M) and lipophilic (arecoline, oxotremorine-2, and L-670,548) agonists. The loss of response for both groups of agonists could be prevented if the incubation temperature was maintained at 37 degrees C, rather than at 10 degrees C. At the latter temperature carbachol pretreatment of SK-N-SH cells reduced the maximum release of inositol phosphates elicited by either carbachol or L-670,548 but not the agonist concentrations required for half-maximal stimulation. Radioligand binding studies, carried out at 10 degrees C, indicate that following receptor sequestration, significantly higher concentrations of carbachol were required to occupy the available muscarinic receptor sites. In contrast the lipophilic full agonist L-670,548 recognized receptors present in control and carbachol-pretreated cells with comparable affinities. Analysis of the inositol lipids present after carbachol pretreatment indicate that only a minimal depletion of the substrates necessary for phospholipase C activation had occurred. The results indicate that the agonist-induced sequestration of muscarinic receptors from the cell surface results in a loss of stimulated phosphoinositide hydrolysis when measured under conditions in which the return of the sequestered receptors to the cell surface is prevented. Thus, only those receptors present at the cell surface are linked to phospholipase C activation.