Many hormones act on neuroendocrine cells by activating second messenger pathways. Two of these, the phosphoinositol and cAMP-dependent pathways, cause changes in cellular activity through specific protein kinases. By phosphorylating cytoplasmic and nuclear proteins, these kinases apparently coordinate cellular processes, including the biosynthesis and release of neuropeptides. Somatostatin biosynthesis and release, for example, are both positively regulated by the second messenger cAMP in hypothalamic cells, and cAMP also induces somatostatin gene transcription 8-10-fold in transfected PC12 pheochromocytoma cells. Transcriptional induction requires a 30-nucleotide cAMP response element (CRE) which is conserved in other cAMP-responsive genes. This element also confers cAMP responsiveness when placed upstream of the heterologous simian virus 40 (SV40) promoter. The somatostatin gene does not, however, respond to cAMP in mutant PC12 cells which lack cAMP-dependent protein kinase type II activity. Activation of somatostatin gene transcription may consequently require the phosphorylation of a nuclear protein which binds to the CRE. Using a DNase I protection assay, we have characterized a nuclear protein in PC12 cells which binds selectively to the CRE in the somatostatin gene. We have purified this protein which is of relative molecular mass 43,000 (Mr 43K) by sequence-specific DNA affinity chromatography. This 43K CRE binding protein (CREB) is phosphorylated in vitro when it is incubated with the catalytic subunit of cAMP-dependent protein kinase. Stimulating PC12 cells with forskolin, an activator of adenyl cyclase, causes a 3-4-fold increase in the phosphorylation of this protein. We conclude that the cAMP-dependent pathway may regulate gene transcription in response to hormonal stimulation by phosphorylating this CREB protein.