A novel serine/threonine protein kinase regulated by phorbol esters and diacylglycerol (named PKD) has been identified. PKD contains a cysteine-rich repeat sequence homologous to that seen in the regulatory domain of protein kinase C (PKC). A bacterially expressed NH2-terminal domain of PKD exhibited high affinity phorbol ester binding activity (Kd = 35 nM). Expression of PKD cDNA in COS cells conferred increased phorbol ester binding to intact cells. The catalytic domain of PKD contains all characteristic sequence motifs of serine protein kinases but shows only a low degree of sequence similarity to PKCs. The bacterially expressed catalytic domain of PKD efficiently phosphorylated the exogenous peptide substrate syntide-2 in serine but did not catalyse significant phosphorylation of a variety of other substrates utilised by PKCs and other major second messenger regulated kinases. PKD expressed in COS cells showed syntide-2 kinase activity that was stimulated by phorbol esters in the presence of phospholipids. We propose that PKD may be a novel component in the transduction of diacylglycerol and phorbol ester signals.