The cellular and subcellular distribution of L-glutamate decarboxylase (GAD), the biosynthetic enzyme for gamma-aminobutyric acid (GABA), was determined immunohistochemically in rat pancreatic islet using light and electron microscopic techniques. The cellular distribution of GAD was determined at the light microscopic level using an elution/re-staining protocol and a computerized digital image processing technique. At this level of resolution, immunofluorescent GAD was observed to be co-localized with immunofluorescent insulin in the islet B-cells and absent in both the A-cells, which contained glucagon, and the D-cells, which contained somatostatin. Subcellular localization of GAD was determined using an electron microscopic, colloidal gold post-embedding protocol and was compared to insulin immunoreactivity in serial sections of the same B-cell. In the same islet B-cell, GAD immunoreactivity appeared predominantly in the extragranular cytoplasm, whereas insulin immunoreactivity was associated with the secretory granules. Quantitative analysis of GAD immunoreactivity in the B-cell revealed 15.3 +/- 1.8 gold particles/micron2 in the cytoplasm, 1.7 +/- 0.2 gold particles/micron2 in the secretory granules, and 0.4 +/- 0.4 gold particles/micron2 in the mitochondria. The results of this study, localization of the biosynthetic enzyme for GABA to the B-cell cytoplasmic compartment and its absence in the secretory granules which contain insulin, are compatible with the hypothesis that GABA functions as an intracellular mediator of B-cell activity.