ADP-ribosyltransferase-2 (ART2), a GPI-anchored, toxin-related ADP-ribosylating ectoenzyme, is prominently expressed by murine T cells but not by B cells. Upon exposure of T cells to NAD, the substrate for ADP-ribosylation, ART2 catalyzes ADP-ribosylation of the P2X7 purinoceptor and other functionally important cell surface proteins. This in turn activates P2X7 and induces exposure of phosphatidylserine and shedding of CD62L. CD38, a potent ecto-NAD-glycohydrolase, is strongly expressed by most B cells but only weakly by T cells. Following incubation with NAD, CD38-deficient splenocytes exhibited lower NAD-glycohydrolase activity and stronger ADP-ribosylation of cell surface proteins than their wild-type counterparts. Depletion of CD38high cells from wild-type splenocytes resulted in stronger ADP-ribosylation on the remaining cells. Similarly, treatment of total splenocytes with the CD38 inhibitor nicotinamide 2′-deoxy-2′-fluoroarabinoside adenine dinucleotide increased the level of cell surface ADP-ribosylation. Furthermore, the majority of T cells isolated from CD38-deficient mice " spontaneously" exposed phosphatidylserine and lacked CD62L, most likely reflecting previous encounter with ecto-NAD. Our findings support the notion that ecto-NAD functions as a signaling molecule following its release from cells by lytic or nonlytic mechanisms. ART2 can sense and translate the local concentration of ecto-NAD into corresponding levels of ADP-ribosylated cell surface proteins, whereas CD38 controls the level of cell surface protein ADP-ribosylation by limiting the substrate availability for ART2. Copyright © 2005 by The American Association of Immunologists, Inc.