We have investigated the mechanisms regulating the clustering of nicotinic acetylcholine receptor (AChR) on the surface of cultured embryonic chick muscle cells. Treatment of these cells with the phorbol ester 12-O-tetradecanoylphorbol-13-acetate (TPA), a potent activator of protein kinase C, was found to cause a rapid dispersal of AChR clusters, as monitored by fluorescence microscopy of cells labeled with tetramethylrhodamine-conjugated alpha-bungarotoxin. The loss of AChR clusters was not accompanied by an appreciable change in the amount of AChR on the surface of these cells, as measured by the specific binding of [125I]Bgt. Analysis of the phosphorylation pattern of immunoprecipitable AChR subunits showed that the gamma- and delta- subunits are phosphorylated by endogenous protein kinase activity in the intact muscle cells, and that the delta-subunit displays increased phosphorylation in response to TPA. Structural analogues of TPA which do not stimulate protein kinase C have no effect on AChR surface topography or phosphorylation. Exposure of chick myotubes to the cholinergic agonist carbamylcholine was found to cause a dispersal of AChR clusters with a time course similar to that of TPA. Like TPA, carbamylcholine enhances the phosphorylation of the delta-subunit of AChR. The carbamylcholine-induced redistribution and phosphorylation of AChR is blocked by the nicotinic AChR antagonist d-tubocurarine. TPA and carbamylcholine have no effect on cell morphology during the time- course of these experiments. These findings indicate that cell surface topography of AChR may be regulated by phosphorylation of its subunits and suggest a mechanism for dispersal of AChR clusters by agonist activation.