Cyclic AMP induces corticosteroid production, differential gene transcription, and cell cycle arrest in adrenal cortex-derived Y1 cells. These responses follow a cAMP-controlled transformation in Y1 cell morphology: the conversion of flat epithelial cells into rounded, highly refractile cells with short processes. Little is known about effector proteins and mechanisms that link activated protein kinase A to the alteration in cell shape. We now report that cAMP causes rapid ( 1 min) and selective tyrosine dephosphorylation of paxillin, a focal adhesion protein. Paxillin is maximally dephosphorylated before other physiological effects of cAMP are detected in Y1 cells. Dephosphopaxillin translocates from focal adhesions to the cytoplasm as stress fibers vanish and F-actin accumulates in membrane ruffles and cytoplasmic aggregates. Remnants of focal adhesion complexes dissociate from the cell cortex and coalesce into large structures that contain aggregated F-actin. Pervanadate, an inhibitor of protein-tyrosine phosphatases, abrogates all effects of cAMP. Conversely, genistein-sensitive protein-tyrosine kinase activity is essential for establishing epithelial morphology and reversing effects of cAMP in Y1 cells. Thus, cAMP/protein kinase A (PKA) actions are initially targeted to focal adhesions and cortical actin cytoskeleton; paxillin is an early and unexpected downstream target in a PKA-mediated signaling pathway, and protein-tyrosine phosphatase activity provides an essential link between PKA activation and the control of cell shape.The second messenger cAMP and its effector, protein kinase A (PKA), 1 mediate the regulation of many processes including glycogenolysis, ion transport, gene transcription, and cell proliferation and differentiation (1-4). Increased intracellular levels of cAMP also cause a reorganization of the actin cytoskeleton in REF52 fibroblasts (5) and a marked alteration in the shape of epithelial cells (6). Hormone-induced changes in cell shape often precede alterations in cell physiology and/or differentiation. An example is provided by murine Y1 cells. The cells have a flat epithelioid morphology and contain receptors for adrenocorticotropic hormone (ACTH) that activate adenylate cyclase (7). Increases in cAMP content elicit a rapid morphological transition that yields rounded refractile cells with short processes (6 -8). This cell shape transition is completed before other responses to cAMP are detected. Slower responses are: synthesis and secretion of corticosteroids, induction of cytochrome P-450 steroid hydroxylase genes, and withdrawal of Y1 cells from the cell cycle (7-10). The cited responses to cAMP produce a phenotype in Y1 cells that mimics normal secretory cells of the zona fasciculata of the adrenal cortex. Furthermore, the change in shape of Y1 cells appears to be required for the subsequent appearance of this differentiated phenotype (11).The abrupt rounding of ACTH-treated Y1 cells apparently reflects a reorganization of the actin cytoskeleton (7,8,11). Although this morpholog...