As it was shown previoulsy by others, the membrane-bound phosphodiesterase (cyclic adenosine 3':5'-monophosphate phosphodiesterase) of rat epididymal fat cells was stimulated when intact cells were exposed to insulin. The levels of stimulation observed in the present study in the cell homogenate and microsomal fraction were approximately 2.0- to 2.5-fold and 2.5- to 3.0-fold, respectively, when the initial substrate level was 100 nM and insulin concentration was 1 to 3 nM. When the microsomal fraction was subjected to a sucrose density gradient centrifugation, most of the insulin-sensitive phosphodiesterase activity was fractionated into the "light" microsomal fraction which was rich in NADH2:potassium ferricyanide:oxidoreductase) and low in 5'-AMPase, adenylate cyclase, and insulin-binding activities. The latter three activities were mostly fractionated into the "heavy" microsomal fraction. Both basal and insulin-stimulated phosphodiesterase activities were low when cells were homogenized in the presence of N-ethylmaleimide or p-chloromercuribenzoate. The insulin-stimulated enzyme activity was also low when cells were homogenized in the presence of --SH compounds (e.g. dithiothreitol) or certain metal-chelating agents (e.g. ethylene glycol bis(beta-aminoethyl ehter)-N,N'-tetraacetate (EGTA)), or in a nitrogen atmosphere. The effect of EGTA was prevented by the addition of certain heavy metal ions but not by the addition of Ca2+ or Ca2+ plus Mg2+ ions. When cells were homogenized in the presence of certain oxidants (e.g. diamide, sodium tetrathionate, or air), a high plus-insulin activity was observed; this activity was not lowered by subsequent treatment of the enzyme with N-ethylmaleimede, EGTA, or fresh cell homogenate that was prepared in the presence of EGTA. However, the activity of an apparently oxidized enzyme could still be lowered by treatment woth dithiothreitol. A partially purified enzyme in the enzyme in the microsomal fraction was fairly stable both in basal and insulin-stimulated states (fully active after 35 days when kept at -20degrees). EGTA added to the homogenization buffer lowered the basal phosphodiesterase activity, but this effect was reversed by the addition of Ca2+ ions. EGTA also decreased the enzyme activity that was stimulated by norepinephrine. However, neither EGTA nor dithiothreitol had any effect on the activities of 5'-AMPase, NADH-dehydrogenase, and malate dehydrogenase of fat cells. The above data indicate that most of the insulin-sensitive phosphodiesterase and the so-called "cell membrane markers" are associated with different subcellular particles in the cell homogenate. In addition, the data seem to indicate that the insulin-stimulated phosphodiesterase has certain --SH groups and that the activity of the enzyme is stabilized when the --SH groups are oxidized by certain oxidants including molecular oxygen. It is suggested that the air oxidation of the enzyme is catalyzed by a trace of certain heavy metal ions and, therefore, can be blocked by a metal-chelating agent.