Cephalopods generally are thought to have only static iridophores, but this report provides qualitative and quantitative evidence for active control of certain iridescent cells in the dermis of the squid Lolliguncula brevis. In vivo observations indicate the expression of iridescence to be linked to agonistic or reproductive behavior. The neuromodulator acetylcholine (ACh) induced dramatic opitcla changes in active iridophores in vitro, whereas ACh had little effect on passive iridophores elsewhere in the mantle skin. Bath application of physiological concentrations of ACh (10(-7)M to 10(-6)M) to excised dermal skin layers transformed the active iridophores from a non-reflective diffuse blue to brightly iridescent colors, and this reaction was reversible and repeatable. The speed of change to iridescent in vitro corresponded well to the speed of changes in the living animal. Pharmacological results indicate the presence of muscarinic receptors in this system and that Ca++ is a mediator for the observed changes. Although ACh is present in physiological quantities in the dermal iridophore layer, it is possible that ACh release is not controlled directly by the nervous system because electrophysiological stimulation of major nerves in the periphery resulted in no iridescence in L. brevis; nor did silver staining or transmission electron microscopy reveal neuronal elements in the iridophore layer. Thus, active iridophores may be controlled by ACh acting as a hormone.