The kinetic characteristics of substrate utilization by hepatic adenylate cyclase were investigated under a variety of incubation conditions, including veriations in pH, [substrate], [Mg2+], and in the absence or presence of glucagon. Activities were compared with ATP and 5'-adenylylimidodiphosphate (App(NH)p) as substrates. The Km for both substrates was about 50 muM; Vmax given with App(NH)p was about 40% lower than obtained with ATP as substrate. In the presence of a saturating concentration of substrate (1 mM), basal activity was increased 4-fold by increasing [Mg2+] from 5 to 50 mM. The stimulatory effect of Mg2+ was not due to an allosteric action since basal activity was only marginally enhanced (40%) when the substrate concentration was reduced to 10 muM. As suggested by deHaen ((1974 J. Biol. Chem. 249, 2756), it is likely that Mg2+ increases enzyme activity by decreasing the concentration of an inhibitory, unchelated form of substrate that competes with the productive magnesium-substrate complex at the active site. Activity-pH profiles differed with ATP and App(NH)p as substrates; a shift in pH optimum was observed which correlated with the different pKa of the terminal phosphate groups of ATP and App(nh)p, and which reflect the concentration of protonated substrate (ATPH-3 minus) present in the incubation medium. Accordingly, protonated substrate is the predominant inhibitory species of unchelated substrate and probably has a considerably higher affinity for the active site than does the magnesium-substrate complex. Glucagon-stimulated activity was less susceptible to inhibition by protonated substrate than is the basal state as evidenced by lower stimulatory effect when the [Mg2+] was increased from 5 to 20 mM. However, increasing the [Mg2+] from 20 to 50 mM resulted in marked inhibition of glucagon-stimulated activity, particularly in the presence of 10 muM substrate. Conversely, at a fixed [Mg2+], concentrations of substrate at least 20-fold higher than the Km were required to achieve maximal hormone-stimulated activity. These findings suggest that the unchelated, fully ionized form of substrate serves as an activating ligand, as has been observed with guanine nucleotides at considerably lower concentrations. Thus, Mg2+ affects adenylate cyclase activity by forming the productive substrate complex and by titrating the inhibitory protonated and activating free forms of substrate. As a result of these effects of unchelated substrate, it proved difficult to evaluate the kinetic parameters involved in substrate binding and utilization and the effects of hormone thereon when substrate was added as the only source of activating ligand. However, linear Michaelis kinetic data were obtained by adding the activating ligand 5'-guanylylimidodiphosphate with glucagon and by making appropriate adjustments of pH and [Mg2+]. Vmax was increased 4-fold without changes in Km by the actions of 5'-guanylylimidodiphosphate and glucagon.