Cryopreservation of isolated rat hepatocytes with dimethyl sulfoxide (Me2SO) using a rapid two-step freezing protocol allows significant preservation of cell recovery and xenobiotic p-nitroanisole (p-NA) metabolism. A decrease in the rate of O-demethylation of p-NA after cryopreservation correlates with a change in cellular viability. A freeze-thaw procedure in the absence of a cryoprotectant results in a sharp inhibition and subsequent washing causes a complete loss of the ability of cells to metabolize the xenobiotic. In the presence of exogenous NADPH the rate of p-NA biotransformation is restored. The content of cytochrome P-450 does not change during a hepatocyte freeze-thaw procedure in the presence or absence of Me2SO. Separation of cells after cryopreservation using a Percoll solution permits the isolation of a suspension, the viability of which does not differ from that of the freshly isolated control, but which metabolizes p-NA at a slower rate. During incubation, viability of cryopreserved cells was reduced. The data indicate that inhibition of monooxygenative activity after hepatocyte cryopreservation results from the loss of endogenous reduced pyridine nucleotides. The loss of pyridine nucleotides results from damage of plasma membrane during both cryopreservation and subsequent incubation in the presence of xenobiotic.