The ability of several chemically modified forms of glucagon to activate adenylate cyclase have been compared with their ability to displace 125I-glucagon from specific membrane binding sites. The results demonstrate that both NH2-terminal and COOH-terminal portions of the peptide, as well as the central region of the glucagon molecule, are all involved in receptor binding and subsequent activation of adenylate cyclase. Receptor binding was very sensitive to chemical modification of the polar residues of glucagon. For example, conversion of the sole lysine residue of glucagon to homoarginine resulted in over a 2-fold loss in receptor-binding affinity. Loss in ability to activate adenylate cyclase was at least as great as loss in receptor binding for all of the derivatives. In the case of derivatives modified at the COOH terminus, the loss in ability to activate adenylate cyclase correlated well with loss in receptor binding. In general, however, the loss of the ability to activate adenylate cyclase was greater than the loss in binding affinity. This difference was greatest for the derivative N alpha-trinitrophenyl glucagon where the loss in adenylate cyclase activation was about 100-fold greater than the loss in receptor binding. This derivative behaved as an antagonist to glucagon in the activation of adenylate cyclase.