Intracellular recordings from identified nigral dopamine neurons in the rat revealed that their potentials are composed of four components: (1) a slow depolarization, (2) an initial segment spike, (3) a somatodendritic spike, and (4) an afterhyperpolarization. By combining intracellular and extracellular recording techniques with anatomical studies using intracellular injections of Lucifer yellow, an attempt was made to localize each of these potentials to various neuronal compartments. Lucifer yellow injections demonstrated that the dopamine neurons recorded have a pyramidal or polygonal shaped soma, 12-30 microns in diameter, with 3-6 thick major dendrites which extend 10-50 microns from the soma before bifurcating. The axon appears to rise from a major dendrite 15-30 microns from the soma. Based on this anatomical configuration, results from the electrophysiological studies suggest that: (1) the slow depolarization is a pacemaker-like conductance most likely localized to the somatic region, (2) the initial segment spike is a low-threshold spike probably located at the axon hillock, (3) the somatodendritic spikes are long duration spikes that rapidly inactivate with depolarization, have a high threshold, and are localized to the dendritic regions. The action potential is then terminated by a long duration afterhyperpolarization. Our data further suggest that spike generation may be initiated by a slow depolarization at the soma triggering a spike in the low-threshold axon hillock which then spreads across the already-depolarized soma to trigger the dendritic spike. Based on the above findings, dopamine neurons can be compartmentalized electrophysiologically and morphologically into subcomponents, each associated with spikes and specific ionic currents. The high threshold dendritic component of the action potential demonstrates rapid inactivation with depolarization, and thus occurs over a rather narrow range of membrane polarization. This limited range of action potential generation may be important in control of dendritic dopamine release and/or modulation of electrical coupling between dopaminergic neurons.