Dictyostelium discoideum cells possess multiple cyclic nucleotide phosphodiesterases that belong either to class I enzymes that are present in all eukaryotes or to the rare beta-lactamase class II. We describe here the identification and characterization of DdPDE4, the third class I enzyme of Dictyostelium. The deduced amino acid sequence predicts that DdPDE4 has a leader sequence, two transmembrane segments, and an extracellular catalytic domain that exhibits a high degree of homology with human cAMP-specific PDE8. Expression of the catalytic domain of DdPDE4 shows that the enzyme is a cAMP-specific phosphodiesterase with a Km of 10 mu M; cGMP is hydrolyzed at least 100-fold more slowly. The full-length protein is shown to be membrane-bound with catalytic activity exposed to the extracellular medium. Northern blots and activity measurements reveal that expression of DdPDE4 is low during single cell stages and increases at 9 h of starvation, corresponding with mound stage. A function during multicellular development is confirmed by the phenotype of ddpde4(-) knock-out strains, showing normal aggregation but impaired development from the mound stage on. These results demonstrate that DdPDE4 is a unique membrane-bound phosphodiesterase with an extracellular catalytic domain regulating intercellular cAMP during multicellular development.