Dictyostelium discoideum cells possess multiple cyclic nucleotide phosphodiesterases that belong either to class I enzymes that are present in all eukaryotes, or to the rare beta-lactamase class II. We describe here the identification and characterization of DdPDE4, the third class I enzyme of Dictyostelium. The deduced amino acid sequence predicts that DdPDE4 has a leader sequence, two transmembrane segments and an extracellular catalytic domain that exhibits a high degree of homology with human cAMP-specific PDE8. Expression of the catalytic domain of DdPDE4 shows that the enzyme is a cAMP-specific phosphodiesterase activity with a KM of 10 µM; cGMP is hydrolyzed at least 100-fold more slowly. The full length protein is shown to be membrane-bound with catalytic activity exposed to the extracellular medium. Northern blots and activity measurements reveal that expression of DdPDE4 is low during single cell stages, and increases at nine hours of starvation, corresponding with mound stage. A function during multicellular development is confirmed by the phenotype of ddpde4- knock-out strains, showing normal aggregation but impaired development from the mound stage on.These results demonstrate that DdPDE4 is a unique membrane-bound phosphodiesterase with an extracellular catalytic domain regulating inter-cellular cAMP during multicellular development.