The high affinity cAMP phosphodiesterase, encoded by PDE2, is an important component of the cAMP-dependent protein kinase signaling system in Saccharomyces cerevisiae. An unexpected phenotype of pde2 mutants is sensitivity to external cAMP. This trait has been found independently for rca1 mutants and has been used to monitor the effects of cAMP on several biological processes. We demonstrate here that RCA1 is identical to PDE2. Further analysis of the phenotype of pde2 deletions reveal that exogenously added cAMP results in an increase in the internal level of cAMP. This increase slows down the rate of cell division by increasing the length of the G1 phase of the cell cycle and leads to increased cell volume. Also, cells with a disrupted PDE2 gene previously arrested by nutrient starvation rapidly lose thermotolerance when incubated with exogenous cAMP. From these observations we propose that a role of the PDE2-encoded phosphodiesterase may be to help insulate the internal cAMP pools from the external environment. This protective role might also be important in other eukaryotic organisms where cAMP is a key second messenger.