Nicotinic acetylcholine receptors mediate fast synaptic transmission by fluxing ions across the membrane in response to neurotransmitter binding. We show here that during affinity purification of the nicotinic acetylcholine receptor from Torpedo, phosphatidic acid, but not other anionic or zwitterionic phospholipids, is hydrolyzed to diacylglycerol. The phospholipase C activity elutes with the acetylcholine receptor and is inhibited by a lipid phosphate phosphohydrolase inhibitor, sodium vanadate, but not a phosphatidate phosphohydrolase inhibitor, N-ethylmaleimide. Further, the hydrolysis product of phosphatidic acid, diacylglycerol, enhances the functional capabilities of the acetylcholine receptor in the presence of anionic lipids. We conclude that a phospholipase C activity, which appears to be specific for phosphatidic acid, is associated with the nicotinic acetylcholine receptor. The acetylcholine receptor may directly or indirectly influence lipid metabolism in a manner that enhances its own function.