Internalization and intracellular processing of ANP-B and C receptors play an important role in regulating cell responsiveness to atrial natriuretic peptides (ANP). Receptor internalization was indirectly monitored with 125I labelled ligand. When 125I-ANP(99-126) was internalized by the cells at 37 degrees C, 55% of the internalized radioactivity was localized in the lysosomal fraction. When receptors were affinity-labelled with 125I-ANP(99-126) and allowed to internalize for varying time periods, two radiolabelled proteins in the m.wt range of 56 and 52 KDa were detected in the cytosolic extract. These proteins appear to be the hydrolytic products of the ANP-C receptor expressed on the plasma membrane. In addition to lysosomal delivery, shedding of the ANP-C receptor from the cell surface was detected following incubation of cells with 125I-ANP(99-126). The dual processes may function to clear exogenous ANP from the extracellular compartments.