The uptake and processing of glucagon into liver endosomes were studied in vivo by subcellular fractionation. After injection of [[125I]iodo-Tyr10]glucagon and [[125I]iodo-Tyr13]glucagon to rats, the uptake of radioactivity into the liver was maximum at 2 min (6% of the dose/g of tissue). On differential centrifugation, the radioactivity in the homogenate was recovered mainly in the nuclear (N), microsomal (P) and supernatant (S) fractions, with maxima at 5, 10 and 40 min, respectively; recovery of radioactivity in the mitochondrial-lysosomal (ML) fraction did not exceed 6% and was maximal at 20 min. On density-gradient centrifugation, the radioactivity associated first (2-10 min) with plasma membranes and then (10-40 min) with Golgi-endosomal (GE) fractions, with 2-5-fold and 20-150-fold enrichments respectively. Subfractionation of the GE fractions showed that, unlike the Golgi marker galactosyltransferase, the radioactivity was density-shifted by diaminobenzidine cytochemistry. Subfractionation of the ML fraction isolated at 40 min showed that more than half of the radioactivity was recovered at lower densities than the lysosomal marker acid phosphatase. Throughout the time of study, the [125I]iodoglucagon associated with the P, PM and GE fractions remained at least 80-90% trichloroacetic acid (TCA)-precipitable, whereas that associated with other fractions, especially the S fraction, became progressively TCA-soluble. On gel filtration and h.p.l.c., the small amount of degraded [125I]iodoglucagon associated with GE fractions was found to consist of monoiodotyrosine. Chloroquine treatment of [125I]iodoglucagon-injected rats caused a moderate but significant increase in the late recovery of radioactivity in the ML, P and GE fractions, but had little effect on the association of the ML radioactivity with acid-phosphatase-containing structures. Chloroquine treatment also led to a paradoxical decrease in the TCA-precipitability of the radioactivity associated with the P and GE fractions. Upon h.p.l.c. analysis of GE extracts of chloroquine-treated rats, at least four degradation products less hydrophobic than intact [125I]iodoglucagon were identified. Radio-sequence analysis of four of these products revealed three cleavages, affecting bonds Ser2-Gln3, Thr5-Phe6 and Phe6-Thr7. When GE fractions containing internalized [125I]iodoglucagon were incubated in iso-osmotic KCl at 30 degrees C, a rapid generation of TCA-soluble products was observed, with a maximum at pH 4. We conclude that endosomes are a major site at which internalized glucagon is degraded, endosomal acidification being required for optimum degradation.