Cysts, a common abnormality of kidneys, are collections of urine-like fluid enclosed by a continuous layer of epithelial cells. Renal cysts derive from nephrons and collecting ducts and progressively enlarge as a consequence of epithelial proliferation and transepithelial fluid secretion. The initiation of cyst formation and the factors that control cyst enlargement are unknown. We used an in vitro model of renal cysts to explore the role of the cAMP signal transduction system in the formation and expansion of cysts. MDCK cells, cultured in hydrated-collagen gel, produced polarized monolayered epithelial cysts when intracellular cAMP was increased by prostaglandin E1, arginine vasopressin, cholera toxin, forskolin, or 8-bromoadenosine 3',5'-cyclic monophosphate. All agonists were potentiated by 3-isobutyl-1-methylxanthine, a nucleotide phosphodiesterase inhibitor. The cell proliferation component of cyst enlargement was accelerated by cAMP agonists, as shown by the increased growth of MDCK cells in subconfluent monolayers. The fluid secretion component, reflected by the transepithelial movement of fluid across polarized monolayers of MDCK cells grown on permeable supports, was stimulated by cAMP agonists in the basolateral medium. Chloride levels were higher in the cyst fluid and the secreted fluid than in the bathing medium. We conclude that the development of MDCK cysts is dependent on cAMP. This signal transduction system may be an important modulator of epithelial cell proliferation and transepithelial fluid secretion in the kidney.