Dexamethasone suppresses phagocytosis of heat killed Saccharomyces cerevisiae in cultures of murine peritoneal macrophages. Recent observations suggest that dexamethasone induces a phagocytic inhibitory protein that suppresses yeast ingestion by inhibiting macrophage phospholipase A2 activity. The present investigation, therefore, examined whether macrophage lipid metabolism is modulated by dexamethasone. Control and steroid treated macrophages were allowed to incorporate radiolabeled arachidonate and were incubated subsequently in the absence and presence of yeast. Following ingestion by control macrophages, arachidonate from phosphatidylcholine was readily cleaved to free fatty acid and transferred to the neutral lipid fraction. In contrast, arachidonate release was inhibited in dexamethasone treated macrophages. These results suggest that the suppression of yeast phagocytosis by dexamethasone action may be associated with the inhibition of phospholipase A2 activity.