With an in vitro model using enclosed intrahepatic bile duct units (IBDUs) isolated from wild-type and somatostatin receptor (SSTR) subtype 2 knockout mice, we tested the effects of somatostatin, secretin, and a selective SSTR2 agonist (L-779976) on fluid movement across the bile duct epithelial cell layer. By RT-PCR, four of five known subtypes of SSTRs (SSTR1, SSTR2A/2B, SSTR3, and SSTR4, but not SSTR5) were detected in cholangiocytes in wild-type mice. In contrast, SSTR2A/2B were completely depleted in the SSTR2 knockout mice whereas SSTR1, SSTR3 and SSTR4 were expressed in these cholangiocytes. Somatostatin induced a decrease of luminal area of IBDUs isolated from wild-type mice, reflecting net fluid absorption; L-779976 also induced a comparable decrease of luminal area. No significant decrease of luminal area by either somatostatin or L-779976 was observed in IBDUs from SSTR2 knockout mice. Secretin, a choleretic hormone, induced a significant increase of luminal area of IBDUs of wild-type mice, reflecting net fluid secretion; somatostatin and L-779976 inhibited (P < 0.01) secretin-induced fluid secretion. The inhibitory effect of both somatostatin and L-779976 on secretin-induced IBDU secretion was absent in IBDUs of SSTR2 knockout mice. Somatostatin induced an increase of intracellular cGMP and inhibited secretin-stimulated cAMP synthesis in cholangiocytes; depletion of SSTR2 blocked these effects of somatostatin. These data suggest that somatostatin regulates ductal bile formation in mice not only by inhibition of ductal fluid secretion but also by stimulation of ductal fluid absorption via interacting with SSTR2 on cholangiocytes, a process involving the intracellular cAMP/cGMP second messengers.