Following the administration of latex particles (0.46 micron), cytochrome P-450 dependent monooxygenase system was depressed in the livers of mice. These particles were taken up exclusively by Kupffer cells in the liver, and no particles were found in the hepatocytes which contain most of the monooxygenase capacity in that organ. Cytochrome P-450 was also depressed in isolated hepatocytes incubated with phagocytosing Kupffer cells or the cell free filtrate from an incubation mixture of Kupffer cells and latex particles. Kupffer cells and hepatocytes were then incubated in a double-chambered vessel in which the two cell types were separated by a semi-permeable membrane. When latex particles were added to the chamber containing Kupffer cells, a factor was released which crossed the semi-permeable membrane and depressed cytochrome P-450 and benzo[a]pyrene hydroxylase in hepatocytes contained in the other chamber. It is concluded that, during the process of phagocytosis (in vivo or in vitro) by Kupffer cells in the liver, the levels of cytochrome P-450 and related drug biotransformation were depressed in the adjacent parenchymal cells.