The distribution and localization of pituitary adenylate cyclase-activating polypeptide (PACAP) in the rat retina were studied by immunocytochemistry with both light and electron microscopy. PACAP-like immunoreactivity (PACAP-LI) was detected in the amacrine and horizontal cells as well as in the inner plexiform layer, the ganglion cell layer and the nerve fiber layer. PACAP-LI seemed to be concentrated predominantly in the neuronal perikarya and their processes, but not in other cells in the retina. At the ultrastructural level, PACAP-LI was visible in the plasma membranes, rough endoplasmic reticulum, and cytoplasmic matrix in the PACAP-positive neurons in the inner nuclear layer. In the inner plexiform layer, PACAP-positive amacrine cell processes made synaptic contact with immunonegative amacrine cell processes, bipolar cell processes, and ganglion cell terminals. These findings suggest that PACAP may function as a neurotransmitter and/or neuromodulator.