The objective of this study was to identify the biochemical mechanisms concerned with pulmonary growth and development. The data show that cyclic adenosine monophosphate (cAMP), adenylate cyclase, cAMP phosphodiesterase, and their regulation by intracellular modulators are important to the development of rat lungs. The presence in rat lung cytoplasm of factors modulating adenylate cyclase activity is described. These factors appear to be important physiologically as they are present in vivo, they appear in the cytoplasm at a specific age, and their activity is altered by diabetes and adrenalectomy and restored to original levels by administration of insulin and dexamethasone, respectively. The cytoplasmic activation of adenylate cyclase appears to be due to multiple proteins that can be resolved into less active components by DEAE-cellulose chromatography. Recombination of these proteins not only restored activity to the original level but actually resulted in more than additive activation, indicating some interdependence and positive cooperativity among the different components to maximally stimulate adenylate cyclase activity. The rat lung cytoplasmic activator protein regulates adenylate cyclase by a mechanism different from those reported for epinephrine, NaF, 5'-guanylimidophosphate, and calmodulin.