Vasopressin inhibits fatty acid oxidation and stimulates fatty acid esterification, glycogenolysis, and lactate production in hepatocytes from fed rats. In cells from fasted rats, the effect of the hormone on palmitate oxidation was absent, while gluconeogenesis was stimulated. The inhibitory action of vasopressin on palmitate oxidation was not due to the increased lactate production. Neither was it correlated to glycogen content or stimulation of glycogenolysis, which were restored earlier than the vasopressin effect on palmitate oxidation when previously fasted rats were refed a carbohydrate diet. The level of malonyl-CoA was moderately increased by vasopressin. Isolated mitochondria from rat liver were incubated in the presence of [U-14C]palmitate, ATP, CoA carnitine, glycerophosphate, ethylene glycol bis(beta-aminoethyl ether) N,N'-tetraacetic acid, and varying amounts of calcium. The oxidation of palmitate was inhibited when the concentration of free calcium was increased from about 0.1 to 10 microM. Simultaneously, palmitate esterification was stimulated. This effect of calcium was observed also with mitochondria from fasted rats and with octanoate as well as palmitate as the substrate. Carnitine acylation was not affected by calcium. The possibility that the observed effects of calcium on mitochondrial fatty acid utilization is part of the mechanism of action of vasopressin on hepatocyte fatty acid metabolism is discussed.