Adenylate cyclase of rat adipocyte membranes exhibited dual responses in a strictly GTP-dependent manner; an activation took place in the presence of certain receptor agonists such as isoproterenol or secretin, whereas an inhibitory phase was observed with other agonists such as prostaglandin E1 or purine-modified adenosine as well as with the stimulatory agonists at higher GTP concentrations. Treatment of membrane donor cells with islet-activating protein (IAP), pertussis toxin, abolished the inhibitory phase while preserving the activatory phase. This unique action of IAP was associated with ADP-ribosylation of a membrane Mr = 41,000 protein. In contrast, the inhibitory phase was preserved in membranes from cholera toxin-treated cells. Monophasic and persistent activation of the cyclase was provoked by guanyl-5'-yl beta,gamma-imidodiphosphate. The time lag normally observed for the guanyl-5'-yl beta,gamma-imidodiphosphate activation was decreased by isoproterenol or cholera toxin but was not altered by IAP treatment. Our conclusion is that the sole site of IAP action is the guanine nucleotide regulatory protein (Ni) that is required for transmission of inhibitory signals from receptors to the catalytic unit of adenylate cyclase; the function of Ni is lost upon IAP-catalyzed ADP ribosylation of the Mr = 41,000 protein which appears to be an active subunit of Ni. A possibility is discussed that rather diverse effects of IAP so far reported with various cell types are accounted for in terms of such interference with the function of Ni.