Incubation of intact purified rat liver plasma membranes with insulin, cyclic AMP and ATP led to the activation of the peripheral "low-Km" cyclic AMP phosphodiesterase. When (gamma-32P]ATP was included in the incubation mixture, after purification of this enzyme to homogeneity it was found to contain 1 mol of alkali-labile 32P/mol of enzyme. Treatment of the homogeneous phosphorylated enzyme with alkaline phosphatase released all of the 32P from the protein while restoring its activity to the native state. The reversibility of the activation that is achieved by the phosphorylation of this enzyme could also be demonstrated with a high-speed supernatant from rat liver. This restored the activity of the activated membrane-bound enzyme to its native state. The Ka for the cyclic AMP-dependence of this process (1.6 micrometer) was unaffected by a range of ATP concentrations (1-10 mM) and by a range of membrane protein concentrations (0.2-2 mg/ml). Adenylyl imidodiphosphate could not substitute for ATP, and concanavalin A could not substitute for insulin, as essential ligands in the activation process. The purified activated enzyme exhibited Km 0.6 microM, Vmax 10.9 units/mg of protein and Hill coefficient (h) 0.47. The Vmax. for this activated enzyme was much higher than that of the native enzyme, yet h was much lower.