CD38 is a type II transmembrane glycoprotein that is extensively expressed on cells of hematopoietic and non-hematopoietic lineage. Although the intracellular domain of CD38 is not homologous to any known proteins, the extracellular domain of CD38 is structurally related to enzymes in the ADP-ribosyl cyclase family. The structural homology between CD38 and the cyclase family members extends to functional homology, as the extracellular domain of CD38 can mediate the catalysis of beta-NAD+ into nicotinamide, ADP-ribose (ADPR) and, to a lesser extent, into cyclic ADPR-ribose (cADPR). Extensive investigation in other systems has shown that cADPR is an important regulator of intracellular Ca2+ release. Since engagement of CD38 on hematopoietic cells with anti-CD38 Abs has been shown to have potent effects on a number of in vitro cellular responses, we have speculated that cADPR might control CD38-mediated signal transduction. However, it has been difficult to understand how a mediator which is typically an intracellular signaling molecule could potentiate its effects from an extracellular location, thus posing a dilemma which pertains to all ecto-enzymes and the mechanisms by which they regulate signal transduction and cellular processes. This review describes the biologic properties of murine CD38, its role in humoral immunity, and its signal transduction properties in B lymphocytes. We suggest that signaling through CD38 represents a new paradigm in lymphocyte signal transduction and is predicated upon extracellular, rather than intracellular, crosstalk.