The synthetic diacylglycerol 1-oleoyl-2-acetyl glycerol (OAG) and phorbol esters activate protein kinase C in intact cells. We report here that OAG inhibits the binding of 125I-labelled epidermal growth factor (125I-EGF) to Swiss 3T3 cells. The inhibition was detected as early as 1 min after treatment at 37 degrees C and persisted for at least 120 min. The effect of OAG was reversed upon removal of this diacylglycerol. Detailed Scatchard analysis of 125I-EGF binding to Swiss 3T3 cells at 4 degrees C after a 1 h incubation with a saturating dose of OAG at 37 degrees C, demonstrates that this OAG pretreatment does not change the apparent number of EGF receptors but causes a marked decrease in their apparent affinity for the ligand. Prolonged treatment (40 h) of the cells with phorbol dibutyrate (PBt2) which causes a marked decrease in the number of phorbol ester binding sites and in the activity of protein kinase C, prevented the inhibition of 125I-EGF binding by both PBt2 and OAG. The results support the possibility that protein kinase C plays a role in the transmodulation of the EGF receptor in intact cells.