We have evaluated the utility of the hepatoma-derived hybrid cell line, WIF-B, for in vitro studies of polarized hepatocyte functions. The majority (> 70%) of cells in confluent culture formed closed spaces with adjacent cells. These bile canalicular-like spaces (BC) accumulated fluorescein, a property of bile canaliculi in vivo. By indirect immunofluorescence, six plasma membrane (PM) proteins showed polarized distributions similar to rat hepatocytes in situ. Four apical PM proteins were concentrated in the BC membrane of WIF-B cells. Microtubules radiated from the BC (apical) membrane, and actin and foci of gamma-tubulin were concentrated in this region. The tight junction-associated protein ZO-1 was present in belts marking the boundary between apical and basolateral PM domains. We explored the functional properties of this boundary in living cells using fluorescent membrane lipid analogs and soluble tracers. When cells were incubated at 4 degrees C with a fluorescent analog of sphingomyelin, only the basolateral PM was labeled. In contrast, when both PM domains were labeled by de novo synthesis of fluorescent sphingomyelin from ceramide, fluorescent lipid could only be removed from the basolateral domain. These data demonstrate the presence of a barrier to the lateral diffusion of lipids between the PM domains. However, small soluble FITC-dextrans (4,400 mol wt) were able to diffuse into BC, while larger FITC-dextrans were restricted to various degrees depending on their size and incubation temperature. At 4 degrees C, the surface labeling reagent sNHS-LC-biotin (557 mol wt) had access to the entire PM, but streptavidin (60,000 mol wt), which binds to biotinylated molecules, was restricted to only the basolateral domain. Such differential accessibility of well-characterized probes can be used to mark each membrane domain separately. These results show that WIF-B cells are a suitable model to study membrane trafficking and targeting in hepatocytes in vitro.