Recent studies demonstrate that cAMP levels are tightly controlled during demyelination and remyelination in Schwann cells as cAMP decreases to 8-10% of normal following both sciatic nerve crush or permanent transection injury and only begins to increase in the crushed nerve after remyelination (Poduslo, J. F., Walikonis, R. S., Domec, M., Berg, C. T., and Holtz-Heppelmann, C. J. (1995) J. Neurochem. 65, 149-159). To investigate the mechanisms responsible for this change in cAMP levels, cAMP phosphodiesterase (PDE) and adenylyl cyclase activities were determined before and after sciatic nerve injury. Basal cAMP PDE activity in soluble endoneurial homogenates of normal nerve was 34.9 +/- 1.9 pmol/mg of protein/min (chi +/- S.E.; n = 10). This activity increased about 3-fold within 6 days following both injuries. Basal PDE activity remained elevated in the transected nerve, but declined to 70 pmol/mg of protein/min in the crushed nerve at 21 and 35 days following injury. Isozyme-specific inhibitors and stimulators were used to identify the PDE families in the sciatic nerve. The low Km cAMP-specific (PDE4) and the Ca2+/calmodulin-stimulated (PDE1) families were found to predominate in assays using endoneurial homogenates. The PDE4 inhibitor rolipram also increased cAMP levels significantly after incubation of endoneurial tissue with various isozyme-specific inhibitors, indicating that PDE4 plays a major role in determining cAMP levels. PDE4 mRNA was localized by in situ hybridization to cells identified as Schwann cells by colabeling of S100, a Schwann cell specific protein. Adenylyl cyclase activity declined following injury, from 3.7 pmol/mg of protein/min in normal nerve to 0.70 pmol/mg/min by 7 days following injury. Both decreased synthesis and increased degradation contribute, therefore, to the reduced levels of cAMP following peripheral nerve injury and are likely critical to the process of Wallerian degeneration.