A putative endogenous cannabinoid ligand, arachidonylethanolamide (termed "anandamide"), was isolated recently from porcine brain. Here we demonstrate that this compound is a specific cannabinoid agonist and exerts its action directly via the cannabinoid receptors. Anandamide specifically binds to membranes from cells transiently (COS) or stably (Chinese hamster ovary) transfected with an expression plasmid carrying the cannabinoid receptor DNA but not to membranes from control nontransfected cells. Moreover, anandamide inhibited the forskolin-stimulated adenylate cyclase in the transfected cells and in cells that naturally express cannabinoid receptors (N18TG2 neuroblastoma) but not in control nontransfected cells. As with exogenous cannabinoids, the inhibition by anandamide of the forskolin-stimulated adenylate cyclase was blocked by treatment with pertussis toxin. These data indicate that anandamide is an endogenous agonist that may serve as a genuine neurotransmitter for the cannabinoid receptor.