Membrane polarity is maintained by a complex intermingling of various trafficking pathways, including basolateral and apical endocytosis. The present work was undertaken to better define the role of basolateral endocytic transport in apical membrane homeostasis. When polarized HepG2 hepatoma cells were incubated with calmodulin antagonists, the cells lost their polarity, as reflected by an inhibition of lipid transport of a fluorescent sphingomyelin to the apical membrane and an impediment of its recycling to the basolateral membrane. Instead, an accumulation of the lipid in dilated early endosomal compartments was observed, presumably due to a frustration of vesiculation. Interestingly, lipid transport to the apical pole, lipid recycling to the basolateral membrane and cell polarity were reestablished, while dilated compartments disappeared, when the cells were simultaneously treated with specific inhibitors of protein kinase C (PKC). Consistently, following activation of PKC, extensive dilation/vacuolation of early sorting endosomes was observed, very similar as seen upon treatment with calmodulin antagonists. Thus, the results indicate that membrane trafficking at early steps of the basolateral endocytic pathway in HepG2 cells is regulated by an intricate interplay between calmodulin and PKC. This interference, although not affecting endocytosis as such, compromises cell polarity by impeding membrane trafficking from early endosomes to the apical membrane.