Coordination of cell movement with cell differentiation is a major feat of embryonic development. The Dictyostelium stalk always forms at the organizing tip by a mechanism that is not understood. We previously reported that c-di-GMP, synthesized by diguanylate cyclase A (DgcA), induces stalk formation. We here used transcriptional profiling of dgca- structures to identify target genes for c-di-GMP, and used these genes to investigate the c-di-GMP signal transduction pathway. We found that knock-down of PKA activity in prestalk cells reduced stalk gene induction by c-di-GMP, while PKA activation bypassed the c-di-GMP requirement for stalk gene expression. c-di-GMP caused a persistent increase in cAMP, which still occurred in mutants lacking the adenylate cyclases ACG or ACR, or the cAMP phosphodiesterase RegA. However, both inhibition of adenylate cyclase A (ACA) with SQ22536, and incubation of a temperature-sensitive ACA mutant at the restrictive temperature prevented c-di-GMP induced cAMP synthesis as well as c-di-GMP induced stalk gene transcription. ACA produces the cAMP signals that coordinate Dictyostelium morphogenetic cell movement and is highly expressed at the organizing tip. The stalk-less dgca- mutant regained its stalk by expression of a light-activated adenylate cyclase from the ACA promoter and exposure to light, indicating that cAMP is also the intermediate for c-di-GMP in vivo. Our data show that the more widely expressed DgcA activates tip-expressed ACA, which then acts on PKA to induce stalk genes. These results explain why stalk formation in Dictyostelia always initiates at the site of the morphogenetic organizer.