The transmembrane enzyme CD38, a multifunctional protein ubiquitously present in cells, is the main enzyme that synthesizes and hydrolyzes cyclic adenosine 5'-diphosphate-ribose (cADPR), an intracellular Ca(2+)-mobilizing messenger. CD38 is thought to be a type II transmembrane protein with its carboxyl-terminal catalytic domain located on the outside of the cell; thus, the mechanism by which CD38 metabolizes intracellular cADPR has been controversial. We developed specific antibodies against the amino-terminal segment of CD38 and showed that two opposing orientations of CD38, type II and type III (which has its catalytic domain inside the cell), were both present on the surface of HL-60 cells during retinoic acid-induced differentiation. When activated by interferon-γ, human primary monocytes and the monocytic U937 cell line exhibited a similar co-distribution pattern. Site-directed mutagenesis experiments showed that the membrane orientation of CD38 could be converted from a mixture of type II and type III orientations to all type III by mutating the cationic amino acid residues in the amino-terminal segment of CD38. Expression of type III CD38 construct in transfected cells led to increased intracellular concentrations of cADPR, indicating the importance of the type III orientation of CD38 to its Ca(2+) signaling function. The identification of these two forms of CD38 suggests that flipping the catalytic domain from the outside to the inside of the cell may be a mechanism regulating its signaling activity.