The specific role of sulfhydryl groups in cell-mediated cytoxicity (CMC) is still unknown. Here we demonstrate that natural killer cells and lymphokine-activated killer cells, when incubated with phenylarsine oxide (PAO), an organoarsenic compound showed a dose- and time-dependent inhibition of CMC and antibody-dependent cellular cytotoxicity (ADCC). PAO interacted directly with the effector cells (EC) without affecting the target cells (TC) or EC: TC conjugate formation. The loss of cytotoxicity was not due to lack of degranulation or to inhibition of serine esterases in PAO-treated cells. However, PAO inhibited the target-induced down regulation of phosphatidylinositol (PI) level in NK cells indicating that PAO blocked the cytolytic cascade at an early stage, upstream of Pl. In addition, PAO also did not affect the disulfide link of the zeta-chain dimers, implicated in signal transduction in cytotoxic lymphocytes but did cause the rapid phosphorylation of the zeta chain. Finally, the effect of PAO on CMC was competitively blocked by dithiothreitol, a dithiol, but not by beta-mercaptoethanol, a mono-thiol. Taken together, these results indicate for the first time how sulfyhydryl groups may regulate CMC and ADCC.