The trifunctional protein CAD, which contains the first three enzyme activities of pyrimidine nucleotide biosynthesis (carbamyl phosphate synthetase II, aspartate transcarbamylase and dihydro-orotase), is phosphorylated stoichiometrically by cyclic AMP-dependent protein kinase. Phosphorylation activates the ammonia-dependent carbamyl phosphate synthetase activity of the complex by reducing the apparent Km for ATP. This effect is particularly marked in the presence of the allosteric feedback inhibitor, UTP, when the apparent Km is reduced by greater than 4-fold. Inhibition by physiological concentrations of UTP is substantially relieved by phosphorylation. Cyclic AMP-dependent protein kinase phosphorylates two serine residues on the protein termed sites 1 and 2, and the primary structures of tryptic peptides containing these sites have been determined: Site 1: Arg-Leu-Ser(P)-Ser-Phe-Val-Thr-Lys Site 2: Ile-His-Arg-Ala-Ser(P)-Asp-Pro-Gly-Leu-Pro-Ala-Glu-Glu-Pro-Lys During the phosphorylation reaction, activation of the carbamyl phosphate synthetase shows a better correlation with occupancy of site 1 rather than site 2. Both phosphorylation and activation can be reversed using purified preparations of the catalytic subunits of protein phosphatases 1- and -2A, and inactivation also correlates better with dephosphorylation of site 1 rather than site 2. We believe this to be the first report that a key enzyme in nucleotide biosynthesis is regulated in a significant manner by reversible covalent modification. The physiological role of this phosphorylation in the stimulation of cell proliferation by growth factors and other mitogens is discussed.