Inhibition of astrocyte proliferation has been suggested to be an important event in the developmental neurotoxicity associated with ethanol. We have previously shown that the acetylcholine analog carbachol induces astroglial cell proliferation through activation of muscarinic M3 receptors, and that ethanol strongly inhibits this effect by inhibiting activation of protein kinase C (PKC) zeta and its down-stream effector 70-kDa ribosomal S6 kinase (p70S6K). In this study, we investigated whether inhibition by ethanol of this signal transduction pathway in 1321N1 human astrocytoma cells may be due, at least in part, to inhibition of the formation of the PKC zeta activator phosphatidic acid (PA), which is formed by hydrolysis of phosphatidylcholine by phospholipase D (PLD). 1-Butanol, which is a substrate for PLD and inhibits PA formation, inhibited carbachol-induced cell proliferation and the underlying intracellular signaling, whereas its analog tert-butanol, which is a poor substrate for PLD, was much less effective. In addition, exogenous PAs were able to increase DNA synthesis and to activate PKC zeta and p70S6K. Furthermore, in carbachol-stimulated cells, ethanol increased the formation of phosphatidylethanol and inhibited the formation of PA. Taken together, these results indicate that PLD activation plays an important role in carbachol-induced astroglial cell proliferation by generating the second messenger PA, which activates PKC zeta. Moreover, the effect of ethanol on carbachol-induced proliferation appears to be mediated, at least in part, by its ability to interact with PLD leading to a decreased synthesis of PA.