A widely accepted model for catabolite repression posits that phospho-IIAGlc of the bacterial phosphotransferase system activates adenylyl cyclase (AC) activity. For many years, attempts to observe such regulatory properties of AC in vitro have been unsuccessful. To further study the regulation, AC was produced fused to the transmembrane segments of the serine chemoreceptor Tsr. Cells harboring Tsr-AC and normal AC, expressed from the cya promoter on a low copy number vector, exhibit similar behavior with respect to elevation of cAMP levels resulting from deletion of crp, expressing the catabolite regulatory protein. Membrane-bound Tsr-AC exhibits activity comparable with the native form of AC. Tsr-AC binds IIAGlc specifically, regardless of its phosphorylation state, but not the two general phosphotransferase system proteins, enzyme I and HPr; IIAGlc binding is localized to the C-terminal region of AC. Binding to membranes of either dephospho- or phospho-IIAGlc has no effect on AC activity. However, in the presence of an Escherichia coli extract, P-IIAGlc, but not IIAGlc, stimulates AC activity. Based on these findings of a direct interaction of IIAGlc with AC, but activity regulation only in the presence of E. coli extract, a revised model for AC activity regulation is proposed.