This study examines the binding and degradation of IGF-II by the ovine liver. Binding and degradation of 125I-IGF-II to isolated hepatocytes was time, temperature and cell number dependent. Ovine and human IGF-II were 2-5 times more effective in inhibiting 125I-hIGF-II binding than were the IGF-I preparations. Insulin did not affect binding. Autoradiographs of 125I-hIGF-II affinity cross-linked to hepatocytes showed a major band of molecular weight 271,000 under reduced conditions. This band was eliminated by 100 nM hIGF-II or oIGF-II but not by excess hIGF-I, oIGF-I or insulin. The internalization of IGF-II was examined by treating the cells with trypsin or sodium acetate to remove surface-bound IGF-II. Both treatments showed that 20-25% of 125I-hIGF-II was internalized. Mannose-6-phosphate at 1, 2 and 4 mM enhanced the binding of 125I-hIGF-II to hepatocytes 3.5, 12.8 and 16.4%, respectively. The lysosomal inhibitors ammonium chloride, chloroquine and leupeptin had no effect on 125I-hIGF-II degradation or cell-associated radioactivity indicating a nonlysosomal pathway of degradation for 125I-hIGF-II in the ovine hepatocyte. The low molecular weight sheep serum IGF binding protein inhibited binding of 125I-hIGF-II in a dose-dependent manner but had no effect on degradation, which suggests that degradation of 125I-hIGF-II is independent of receptor interaction. These studies demonstrate that IGF-II binds to specific high affinity sites in sheep hepatocytes which display the characteristics of type II IGF receptors. A significant fraction of the receptor bound IGF-II is internalized but not degraded by these cells, which suggests that the biological actions of IGF-II may be exerted by an intracellular pathway in sheep hepatocytes.