Labeling experiments with chicken liver cell monolayers and suspensions show that glucagon and N6, O2-dibutyryladenosine 3':5'-cyclic monophosphate (dibutyryl cyclic AMP) block fatty acid synthesis from acetate without appreciably affecting cholesterogenesis from acetate or acylglyceride synthesis from palmitate. Neither acetyl-CoA carboxylase [acetyl-CoA:carbon-dioxide ligase (ADP-forming), EC 6.4.1.2] activity assayed in the presence of citrate nor fatty acid synthetase activity is decreased in extracts of cells treated with glucagon. However, the cytoplasmic concentration of citrate, a required allosteric activator of acetyl-CoA carboxylase, is depressed more than 90% by glucagon or dibutyrl cyclic AMP. Pyruvate or lactate largely prevents the inhibitory action of these effectors on fatty acid synthesis by causing a large increase in cytoplasmic citrate level. Thus, it appears that glucagon, acting via cyclic AMP, inhibits fatty acid synthesis by blocking the formation of citrate, an essential activator of acetyl-CoA carboxylase.