Regulation of cyclic nucleotide concentrations in rod outer segments (Rana pipiens) has been further examined. The present studies show that illumination markedly diminishes the concentration of cyclic nucleotides in suspensions of photoreceptor membranes, but the locus of regulation is cyclic nucleotide phosphodiesterase (EC 3.1.4.c) (light-stimulated) and not adenylate cyclase. There is a marked disproportionality between bleaching of rhodopsin and stimulation of phosphodiesterase. Bleaching only 0.6% of the rhodopsin produces half the stimulation produced by bleaching 100% of the rhodopsin. The process of activation of phosphodiesterase by light is in two steps, a light-dependent step followed by an ATP-dependent step. Illumination (in the absence of ATP) produces a trypsin-resistant, heat-labile, macromolecular stimulator. In the presence of 0.75 mM ATP (GTP or ITP) this stimulator produces a greater than 5-fold increases in the V(max) of photoreceptor phosphodiesterase without changing the K(m). At physiological substrate concentrations (10(-7) M) the rate of hydrolysis of cyclic GMP is 23 times greater than that of cyclic AMP. The light-produced stimulator appears unique to the photoreceptor membranes and does not activate phosphodiesterase in other tissues.