Phospholipases C and D are phosphodiesterases which act on phospholipid head groups. Although the presence of these enzymes in living organisms has long been known, it is only recently that their role in cell signal transduction has been appreciated. The new developments on phospholipases D (PLD) are especially noteworthy, since these enzymes catalyze a novel pathway for second messenger generation. In a variety of mammalian cell systems, several biological or chemical agents have recently been shown to stimulate PLD activity. Depending on the system, activation of PLD has been suggested to be either dependent on, or independent of, Ca2+ and protein kinase C. PLD primarily hydrolyses phosphatidylcholine (PC) but phosphatidylinositol and phosphatidylethanolamine have also been reported as substrates. Different forms of endogenous PLD may also exist in cells. Exogenous addition of PLD causes alterations in cellular functions. In many instances, Ca2+ mobilizing agonists may stimulate both PLC and PLD pathways. Interestingly, several metabolites of these two enzymes are second messengers and are common to both pathways (e.g. phosphatidic acid, diglyceride). This has raised the issue of the interrelationship between these pathways. The regulation of either PLC or PLD by cellular components, e.g. guanine nucleotide binding proteins or protein kinases, is under intense investigation. These recent advances are providing novel information on the significance of phospholipase C and D mediated phospholipid turnover in cellular signalling. This review highlights some of these new discoveries and emerging issues, as well as challenges for future research on phospholipases.