Cyclic AMP and folic acid act as chemotactic factors in Dictyostelium discoideum. Both agents, when applied extracellularly, also control cell development from the growth stage to the acquisition of aggregation competence. Cyclic AMP phosphodiesterase and folate deaminase are extracellular enzymes whose activity is regulated during early differentiation of D. discoideum cells. The two enzymes help control the extracellular levels of cyclic AMP and folic acid. The substrates cyclic AMP and folic acid each increase the extracellular activity of folate deaminase as well as phosphodiesterase. The specificity of extracellular phosphodiesterase regulation by cyclic AMP indicates that the effect is mediated by specific cyclic AMP receptors rather than the catalytic site of cell surface phosphodiesterase. To some extent cyclic AMP and folic acid are interchangeable with respect to regulating differentiation and enhancing enzymatic inactivation of intercellular signals. Thus the two extracellular signals may share a common cellular pathway of signal transduction. The regulation of folate deaminase and phosphodiesterase by folic acid does not always parallel the folic acid effects on development. Pulses of folic acid stimulate development of aggregation competence, whereas a continuous flux inhibits. In contrast, either continuous flux or pulses of folic acid increase the deaminase and phosphodiesterase activities.