In contrast to the membrane guanylate cyclases which are stimulated by extracellular ligands, rod outer segment membrane guanylate cyclase (ROS-GC) activity is modulated intracellularly by calcium in two ways: one, where it is inhibited, and the other, where it is stimulated. The former way is linked to the phototransduction, and physiology of the second is unknown. In both ways calcium modulation of the cyclase occurs through the calcium binding proteins: through guanylate cyclase activating proteins (GCAPs) in the case of phototransduction, and through the recently discovered calcium-dependent GCAP (CD-GCAP) in the case of the other way. The kinase-like domain of ROS-GC is critical for the phototransduction-linked process. The present study shows the expression of alpha and beta chains of S100A1-S100B protein in the bovine retina and demonstrates that this protein stimulates ROS-GC activity in a dose-dependent fashion, that the stimulation is calcium dependent with an EC50 of 17 microM, and that the kinase-like domain is not involved in the calcium-modulated cyclase activation. Instead the involved domain resides at the C-terminal segment, between amino acids 731 and 1054. Thus, this S100A1-S100B protein-mediated calcium-modulated signal transduction mechanism is novel. Furthermore, this study provides the molecular understanding of the two transduction processes mediated by the same ROS-GC, one linked to the low and the other to the high calcium levels.