Despite almost a century of research, the mechanism of anaesthesia remains obscure and there is still no agreement on the location of the site(s) of action. Because the potencies of general anaesthetics increase in proportion to their solubility in olive oil, this led to a consensus that the site is within the cell membrane. This led to theories that lipid bilayer perturbation was the primary event, which was then transmitted to a membrane protein. But at the concentrations used clinically, such perturbations are small. A plausible site would be in or on ion channels at the synapse, where a number of modulatory effects have been described. A possible location for such a site would be at the protein-lipid interface. We report here that anaesthetics inhibit protein kinase C, a key component in signal transduction. The potency is a linear function of the octanol-water partition coefficient (the Meyer-Overton rule of anaesthesia). The effect was obtained in a lipid-free assay, implicating a hydrophobic site in the protein, supporting the contention that a (membrane) protein may be a target for anaesthetic interactions. In a lipid-dependent assay, a potential role of lipids in the protein-site model was demonstrated. The inhibition was absent in the isolated catalytic domain, suggesting that the site of inhibition is on the regulatory subunit, which is unique to protein kinase C.