The action of glucagon on hepatic glycogen and smooth endoplasmic reticulum (SER) was studied in samples of liver taken sequentially from anesthetized rats. The physiological state of each animal was assessed by continuously monitoring aortic blood pressure and blood lactatepyruvate ratios. High hepatic glycogen levels were established by using 10--12 hr fasted control-fed rats infused continuously with glucose. In rats receiving glucose only, hepatic glycogen levels remained above 5.0% during the 4-hr period of glucose administration. Centrilobular hepatocytes displayed an abundance of glycogen which often appeared dispersed with elements of SER between the glycogen particles. Periportal cells had dense clumps of glycogen with few vesicles of SER restricted to the periphery of the glycogen masses. The addition of glucagon to the glucose infusate caused a marked stimulation of glycogenolysis. In these rats, the hepatic glycogen level (X +/- SE) was 6.74 +/- .15% 1 hr after glucose and declined after initiation of glucagon infusion as follows: 5.86 +/- .29% (15 min), 4.89 +/- .26% (1 hr), 2.16 +/- .40% (2 hr), and 1.66 +/- .29% (3 hr). The fine structure of hepatocytes showed a dramatic response to the administration of glucagon. The glycogen regions of the cells were noticeably decreased in size and number of glycogen granules 3 hr after initiation of glucagon infusion, and SER was abundant in both periportal and centrilobular hepatocytes. The interpretation offered is that glucagon induces the formation of new SER membranes which participate in glycogen breakdown and/or glucose release from hepatocytes.