Extracellular cyclic AMP (cAMP) induces the formation of prespore cells in Dictyostelium but inhibits stalk cell formation. We have cloned gskA, which encodes the Dictyostelium homolog of glycogen synthase kinase 3 (GSK-3), and discovered that it is required for both cAMP effects. Disruption of gskA creates a mutant that aggregates but forms few spores and an abnormally high number of stalk cells. These stalk cells probably arise from an expanded prestalk B (pstB) cell population, which normally produces the basal disc of the fruiting body. In cultured mutant cells, cAMP neither inhibits pstB cell differentiation nor induces efficient prespore cell differentiation. We propose that cAMP acts through a common pathway that requires GSK-3 and determines the proportion of prespore and pstB cells.