Dithiothreitol activates the low-Km membrane-bound cyclic AMP phosphodiesterase when incubated with the enzyme in a cell-free system. To investigate the mechanism of its activation, we studied the effect of protease inhibitors. Isolated fat cells obtained from Sprague-Dawley rats were incubated in Krebs-Henseleit Hepes buffer, pH 7.4, at 37 degrees C with and without insulin (2 nM, 10 min). A crude microsomal fraction prepared by differential centrifugation was suspended in 0.25 M sucrose containing 10 mM Tes buffer, pH 7.5, with and without 2 mM dithiothreitol and protease inhibitors at 4 degrees C for 48 h. Dithiothreitol stimulated the phosphodiesterase, in a time-dependent manner. As little as 0.02 mM dithiothreitol activated the enzyme, and the maximally effective dose was 2-10 mM. Among the various protease inhibitors tested, antipain, leupeptin, chymostatin and E-64 were the most effective in preventing activation of the enzyme by dithiothreitol. Antipain also inhibited release of the enzyme from the bound fraction. These results suggest that activation of the low-Km phosphodiesterase by dithiothreitol may be provoked by stimulation of an endogenous thiol protease.