Dictyostelium contains two guanylyl cyclases, GCA, a 12-transmembrane enzyme, and sGC, a homologue of mammalian soluble adenylyl cyclase. sGC provides nearly all chemoattractant-stimulated cGMP formation and is essential for efficient chemotaxis toward cAMP. We show that in resting cells the major fraction of the sGC-GFP fusion protein localizes to the cytosol, and a small fraction is associated to the cell cortex. With the artificial substrate Mn 2+/GTP, sGC activity and protein exhibit a similar distribution between soluble and particulate fraction of cell lysates. However, with the physiological substrate Mg2+/GTP, sGC in the cytosol is nearly inactive, whereas the particulate enzyme shows high enzyme activity. Reconstitution experiments reveal that inactive cytosolic sGC acquires catalytic activity with Mg2+/GTP upon association to the membrane. Stimulation of cells with cAMP results in a twofold increase of membrane-localized sGC-GFP, which is accompanied by an increase of the membrane-associated, guanylyl cyclase activity. In a cAMP gradient, sGC-GFP localizes to the anterior cell cortex, suggesting that in chemotacting cells, sGC is activated at the leading edge of the cell.