Microsomal aryl hydrocarbon hydroxylase (AHH) activity was highly inducible by polychlorinated biphenyls (PCBs) in Fundulus embryos, and stages prior to the appearance of the liver rudiment were competent to respond to these inducers. Consistent with previous observations, basal AHH activity in whole eleutheroembryo microsomes was shown to increase about 9-fold within 24 h of hatching. Aminopyrine N-demethylase (APD) activity also increased with time after hatching. However, the increase in APD activity was much less than that of AHH activity, suggesting a post-hatching change in basal cytochrome P-450 isozyme composition. Also associated with hatching was an increase in the sensitivity to PCBs as inducers of AHH activity. The ED50 for induction of AHH activity in eleutheroembryos was estimated to be only one-third to one-fourth that in embryos. This developmental increase in the sensitivity to PCBs was not due to a redistribution of PCBs between the yolk and tissues with yolk absorption, and was not simply age-dependent, but appeared to require hatching. An additional change in the monooxygenase system associated with hatching was that microsomal NADPH-cytochrome c reductase activity was not inducible by PCBs prior to hatching, but was modestly inducible after hatching. High performance liquid chromatographic (HPLC) analysis of benzo[a]-pyrene (BP) metabolites formed by microsomes from control and PCB-treated eleutheroembryos demonstrated production of dihydrodiols in the 7,8- and 9,10-positions of the benzo-ring. The formation of these metabolites was completely inhibited by the epoxide hydrolase (EH) inhibitor, trichloropropene oxide, indicating the presence of EH in Fundulus eleutheroembryos. Furthermore, these results indicate the Fundulus eleutheroembryos probably can activate BP to its ultimate carcinogenic form, the 7,8-dihydrodiol-9,10-epoxide, and induction of AHH activity by PCBs is likely to increase the rate of formation of activated metabolites from BP and related compounds. However, during the most active period of organogenesis, prior to hatching, basal AHH activity was low, and prehatching stages were relatively insensitive to cytochrome P-450 inducers. The combination of these effects may help to protect these stages from damage from activated metabolites.