cAMP stimulates proliferation in many cell types. For many years, cAMP-dependent protein kinase (PKA) represented the only known cAMP effector. PKA, however, does not fully mimic the action of cAMP, indicating the existence of a PKA-independent component. Since cAMP-mediated activation of the G-protein Rap1 and its phosphorylation by PKA are strictly required for the effects of cAMP on mitogenesis, we hypothesized that the Rap1 activator Epac might represent the PKA-independent factor. Here we report that Epac acts synergistically with PKA in cAMP-mediated mitogenesis. We have generated a new dominant negative Epac mutant that revealed that activation of Epac is required for thyroid-stimulating hormone or cAMP stimulation of DNA synthesis. We demonstrate that Epac's action on cAMP-mediated activation of Rap1 and cAMP-mediated mitogenesis depends on the subcellular localization of Epac via its DEP domain. Disruption of the DEP-dependent subcellular targeting of Epac abolished cAMP-Epac-mediated Rap1 activation and thyroid-stimulating hormone-mediated cell proliferation, indicating that an Epac-Rap-PKA signaling unit is critical for the mitogenic action of cAMP.