Local administration of PGE2 (2 micrograms) to polyether sponges, implanted s.c. in rats, inhibited hydroxyproline and total protein accumulation, without altering relative amounts of collagen, when administered early during granuloma development. In contrast, while DNA as well as total protein accumulation was inhibited by local PGE2 treatment of established granuloma, hydroxyproline accumulation and the relative amounts of collagen were enhanced. This PGE2-induced collagen enhancement was associated with an increased type III : type I collagen ratio, possibly due to differential intracellular breakdown of newly synthesized collagen. The solubility of granuloma collagen was unaffected by PGE2. Impregnation of sponges with carrageenan before implantation, thereby giving macrophage-dominated granuloma, did not affect the changes in protein and DNA induced by later treatment with PGE2, but did reverse the PGE2-induced accumulation of hydroxyproline. This latter effect probably reflects macrophage-mediated, PGE2 enhancement of collagenolytic activity.