Adenosine deaminase (ADA) can localize to the cell surface through its interaction with CD26. Using CD26-transfected cells, we demonstrate that cell surface ADA (ecto-ADA) can regulate adenosine receptor engagement by degrading extracellular adenosine (Ado) to inosine. This ability was dependent upon CD26 expression, the extent of CD26 saturation with ecto-ADA, and the kinetics of the cAMP response. Thus, the cAMP response was markedly decreased when CD26-transfected cells were incubated with an exogenous source of ADA to increase ecto-ADA expression. The ability of ecto-ADA to inhibit the cAMP response was demonstrated by treatment with the specific ADA inhibitor 2'-deoxycoformycin. This inhibited the ability of ecto-ADA to degrade Ado and increased the cAMP response. Although CD26 expression on human thymocytes was low compared with that of CD26-transfected cells, it was saturated with ecto-ADA. When thymocytes incubated at high densities (to mimic the situation in tissues) were exposed to exogenous adenosine, the cAMP response was dramatically decreased by ecto-ADA. We conclude that ecto-ADA has the potential to regulate adenosine receptor-mediated cAMP responses in vivo in tissues with CD26+ cells and sufficient cell death caused by apoptosis or inflammation to provide a source of ADA to bind to CD26.