Cyclic guanosine 3',5'-monophosphate (cyclic GMP) is a second messenger whose role in bacterial signalling is poorly understood. A genetic screen in the plant pathogen Xanthomonas campestris (Xcc) identified that XC_0250, which encodes a protein with a class III nucleotidyl cyclase domain, is required for cyclic GMP synthesis. Purified XC_0250 was active in cyclic GMP synthesis in vitro. The linked gene XC_0249 encodes a protein with a cyclic mononucleotide-binding (cNMP) domain and a GGDEF diguanylate cyclase domain. The activity of XC_0249 in cyclic di-GMP synthesis was enhanced by addition of cyclic GMP. The isolated cNMP domain of XC_0249 bound cyclic GMP and a structure-function analysis, directed by determination of the crystal structure of the holo-complex, demonstrated the site of cyclic GMP binding that modulates cyclic di-GMP synthesis. Mutation of either XC_0250 or XC_0249 led to a reduced virulence to plants and reduced biofilm formation in vitro. These findings describe a regulatory pathway in which cyclic GMP regulates virulence and biofilm formation through interaction with a novel effector that directly links cyclic GMP and cyclic di-GMP signalling.