The disrupted in schizophrenia 1 (DISC1) gene is a candidate susceptibility factor for schizophrenia, but its mechanistic role in the disorder is unknown. Here we report that the gene encoding phosphodiesterase 4B (PDE4B) is disrupted by a balanced translocation in a subject diagnosed with schizophrenia and a relative with chronic psychiatric illness. The PDEs inactivate adenosine 3',5'-monophosphate (cAMP), a second messenger implicated in learning, memory, and mood. We show that DISC1 interacts with the UCR2 domain of PDE4B and that elevation of cellular cAMP leads to dissociation of PDE4B from DISC1 and an increase in PDE4B activity. We propose a mechanistic model whereby DISC1 sequesters PDE4B in resting cells and releases it in an activated state in response to elevated cAMP.