During formation of the Dictyostelium slug extracellular cAMP signals direct the differentiation of prespore cells and DIF, a chlorinated hexaphenone, induces the differentiation of prestalk cells. At culmination the slug transforms into a fruiting body, composed of a stalk supporting a ball of spores. A dominant inhibitor of cAMP-dependent protein kinase (PKA) expressed under the control of a prestalk-specific promoter blocks the differentiation of prestalk cells into stalk cells. Analysis of a gene specifically expressed in stalk cells suggests that PKA acts to remove a repressor that prevents the premature induction of stalk cell differentiation by DIF during slug migration. PKA is also necessary for the morphogenetic movement of prestalk cells at culmination. Expression of the PKA inhibitor under control of a prespore-specific promoter blocks the accumulation of prespore mRNA sequences and prevents terminal spore cell differentiation. Thus PKA is essential for progression along both pathways of terminal differentiation but with different mechanisms of action. On the stalk cell pathway it acts to regulate the action of DIF while on the spore cell pathway PKA itself seems to act as the inducer of spore cell maturation. Ammonia, the extracellular signal which regulates the entry into culmination, acts by controlling the intracellular concentration of cAMP and thus exerts its effects via PKA. The fact that PKA is necessary for both prespore and spore gene expression leads us to postulate the existence of a signalling mechanism which converts the progressive rise in cAMP concentration during development into discrete, PKA-regulated gene activation events.