The mechanism of GTP-specific activation of the membrane-bound cellulose synthase system of Acetobacter xylinum has been further elucidated. The supernatant fraction derived from washed membranes of this organism contains an enzyme which reacts with GTP to form a low molecular mass, heat-stable compound,tentatively characterized as a cyclic oligonuleotide composed of GMP residues, which is the immediate activator of the cellulose synthase. This activation is reversed by a membrane-bound enzyme that degrades the activator; the latter enzyme is inhibited by Ca (2+). It is suggested that the interaction between these enzymes and nucleotide derivatives, mediated by Ca (2+), may regulate cellulose synthesis in VIVO.