Extracellular ATP regulates bile formation by binding to P2 receptors on cholangiocytes and stimulating transepithelial Cl^- secretion. However, the specific signaling pathways linking receptor binding to Cl^- channel activation are not known. Consequently, the aim of these studies in human Mz-Cha-1 biliary cells and normal rat cholangiocyte monolayers was to assess the intracellular pathways responsible for ATP-stimulated increases in [Ca²⁺]_i and membrane Cl^- permeability. Exposure of cells to ATP resulted in a rapid increase in [Ca²⁺]_i and activation of membrane Cl^- currents; both responses were abolished by prior depletion of intracellular Ca²⁺. ATP-stimulated Cl^- currents demonstrated mild outward rectification, reversal at E_Cl^-, and a single-channel conductance of ~17 pS. The conductance response to ATP was inhibited by the Cl^- channel inhibitors NPPB and DIDS, but not the CFTR inhibitor, CFTRinh172. Both ATP-stimulated increases in [Ca²⁺]_i and Cl^- channel activity were inhibited by the P2Y receptor antagonist suramin. The PLC inhibitor U73122, and the IP3 receptor inhibitor 2-APB, both blocked the ATP-stimulated increase in [Ca²⁺]_i and membrane Cl^- currents. Intracellular dialysis with purified IP3 activated Cl^- currents with identical properties to those activated by ATP. Exposure of NRC monolayers to ATP increased short circuit currents (I_sc), reflecting transepithelial secretion. The I_sc was unaffected by CFTRinh172, but was significantly inhibited by U73122 or 2-APB. In summary, these findings indicate that the apical P2Y-IP3 receptor signaling complex is a dominant pathway mediating biliary epithelial Cl^- transport and, therefore, may represent a potential target for increasing secretion in the treatment of cholestatic liver disease.