Insulin has been shown to lower cyclic AMP (cAMP) levels in hormonally sensitive tissue. The mechanism by which this lowering occurs has not yet been fully defined. We studied the effects of insulin on rat adipose tissue cyclic nucleotide phosphodiestrase (PDE) in an incubation system. The adipose tissue used was from both normal animals and animals rendered diabetic by intravenous injections of streptozotocin. Rat epididymal fat pads were incubated in a Krebs-Ringer bicarbonate-4% albumin system with O, 100, 1,000 or 10,000 PU/ml insulin (INS); epinephrine (EPI) or glucagon (GLU) at several different concentrations. After 15 min of incubation, each tissue was homogenized, centrifugated, and the supernatant assayed for cAMP PDE activity using the breakdown of (3-H)cAMP. The data was used to characterize cAMP PDE into apparent high and low K-m PDE components. In the normal animals, INS increased Vmax of the low Km PDE components; 100 pU/ml INS, 30%, 1000 p1/ML INS, 40; and 10,000 pU/ml INS, 20%. In contrast, streptoxotocin diabetes lowered this Vmax by 30%. In the diabetic animals, INS also increased Vmax by 30%. In the diabetic animals, INS also increased Vmax of the low Km PDE component; 100 pU/ml INS, 30%; 1000 pU/ml INS, 50% and 10,000 pU/ml INS, 100%. Epinephrine at 1, 10, and 100 pg/ml stimulated low Km cAMP PDE activity by 67%, 73% and 44% respectively. The stimulatory effect of EPI on both the low and high Km cAMP PDE activity was neutralized by propranolol or adenosine. In comparison to EPI, GLU at very low concentrations, 10-9M, stimulated low Km cAMP PDE. These studies suggest that some of the biologic actions of insulin, an antilipolytic substance, are mediated through activation of low Km PDE. Furthermore, this enzymatic activity is lower in experimental diabetes. The stimulation of low Km PDE by lipolytic hormones may reflect a long-range protective action of these agents.