When stimulated with lipopolysaccharide (LPS), primary cultures of Kupffer cells from the rat secreted a hepatocyte-stimulating factor (Kupffer factor) which induced the synthesis of alpha 2-macroglobulin (a2M) by hepatocytes. The effect of this Kupffer factor was found only when dexamethasone was present in the hepatocyte culture medium. Dexamethasone alone stimulated the a2M synthesis, to some extent, in a dose-dependent manner. When both Dex and the Kupffer factor were added to the medium, cultured hepatocytes synthesized 100-fold a2M, quantitative evidence that explains the in vivo phenomenon in which the serum a2M concentration increases more than 100-fold in the acute phase. A co-culture study with hepatocytes and Kupffer cells indicated that the latter cells have a major function in the induction of a2M synthesis in vivo. A hybridization study with rat a2M cDNA showed that the concentration of mRNA increased in cultured hepatocytes in the presence of the Kupffer factor, but only when dexamethasone was present. From these results we concluded that Kupffer cells secrete a hepatocyte-stimulating factor when stimulated by LPS and that glucocorticoid is essential for the induction of a2M in rat hepatocytes. The effect of the Kupffer factor and glucocorticoid appears to be regulated in the pretranslational, probably the transcriptional, phase.