It is currently believed that the thyroid stimulating immunoglobulin (TSI) of Graves' disease is involved in the pathogenesis of hyperthyroidism through the stimulation of the adenylate cyclase-cyclic AMP system. To evaluate this mechanism, TSI in the serum of patients with Graves' disease was determined by its ability to generate cyclic AMP (cAMP) in monolayer cells prepared from a normal thyroid gland. The thyroid tissue was digested with collagenase, and the liberated follicles were collected from the supernatant and cultured for 7 days. One gram of thyroid tissue yielded more than 1 X 10(7) monolayer cells which were stored in aliquots at -80C. Cells (1 approximately 2 X 10(4)/0.28 cm2 microtiter well) were incubated for 4 hours in 0.2 ml Hanks solution poor in NaCl, with various amounts of bovine TSH (bTSH) or 1.5 mg/ml Graves' serum IgG extracted by polyethylene glycol. cAMP accumulated in medium and cells was measured by RIA. Total cAMP (both medium and cells) was about 4 times higher when NaCl was deleted from Hanks solution. Moreover, as more than 90% of the cAMP was released into the medium, it was possible to omit the measurement of cellular cAMP, which requires extraction. The increase in medium cAMP concentration was dependent upon the number of cells, incubation time, and dose of bTSH. Time course and dose response curves in medium cAMP stimulated by IgG from 3 Graves' patients paralleled those of bTSH equivalent units. Accordingly, TSI activity could be expressed in bTSH equivalent units (bTSH microUeq). The assay could detect 1.0 or 3.3 microU/ml of bTSH and was highly reproducible. TSI activity in all of 16 IgGs from normal subjects was under 3.3 bTSH microUeq/ml, while it was greater than 3.3 bTSH microUeq/ml in IgGs from 33 of 37 (89%) untreated patients with Graves disease. Of the 13 patients followed for 2 to 7 months while on antithyroid drugs, 12 had greater than 3.3 bTSH microUeq/ml and, with the exception of one, all showed a decrease in their TSI activity. Moreover, 5 of 12 patients treated continuously for more than 1 year were TSI negative (less than 3.3 bTSH microUeq/ml), and except for one case, all had TSI values below 8 bTSH microUeq/ml (a value found in only 25% of untreated patients). This in vitro bioassay for TSI is simple and sensitive. It detects the presence of TSI in virtually 90% of untreated patients with Graves' disease. TSI activity showed a clear decrease during the course of antithyroid drug therapy.