Dopamine exerts multiple effects on retinal horizontal cells. Dopamine, via cyclic AMP and protein kinase A, reduces the light responsiveness of horizontal cells and the electrical coupling between the cells. The gating kinetics of both gap-junctional and glutamate channels are altered as a result of phosphorylation by protein kinase A. Dopamine also causes a reversible retraction of neurites of horizontal cells maintained in culture. Diacylglycerol analogues as well as phorbol esters mimic this effect of dopamine, but not cyclic AMP analogues or Forskolin. The results suggest that dopamine causes neurite retraction by the activation of protein kinase C via diacylglycerol.