Phospholipase C (PLC) was purified from squid retina. Soluble Gq alpha, membrane Gq alpha and G beta gamma were isolated from GTP gamma S-treated and light-illuminated photoreceptor membranes. The membrane Gq alpha stimulated phosphatidyl inositol-phospholipase C (PI-PLC) activity in a dose-dependent manner. Soluble Gq alpha and membrane G beta gamma showed no stimulating effects on PLC. GTP gamma S-binding was found exclusively in membrane fraction, with very little present in the KCl-soluble fraction which contained soluble Gq alpha. These results indicate that light-activated rhodopsin activates PLC through membrane-bound Gq alpha and suggest that the rhodopsin/Gq/PLC cascade might be the pathway of phototransduction in squid photoreceptors.