An interesting but largely unanswered biological question is how eukaryotic organisms regulate the size of multicellular tissues. During development, a lawn of Dictyostelium cells breaks up into territories, and within the territories the cells aggregate in dendritic streams to form groups of approximately 20,000 cells. Using random insertional mutagenesis to search for genes involved in group size regulation, we found that an insertion in the cnrN gene affects group size. Cells lacking CnrN (cnrN(-)) form abnormally small groups, which can be rescued by the expression of exogenous CnrN. Relayed pulses of extracellular cyclic AMP (cAMP) direct cells to aggregate by chemotaxis to form aggregation territories and streams. cnrN(-) cells overaccumulate cAMP during development and form small territories. Decreasing the cAMP pulse size by treating cnrN(-) cells with cAMP phosphodiesterase or starving cnrN(-) cells at a low density rescues the small-territory phenotype. The predicted CnrN sequence has similarity to phosphatase and tensin homolog (PTEN), which in Dictyostelium inhibits cAMP-stimulated phosphatidylinositol 3-kinase signaling pathways. CnrN inhibits cAMP-stimulated phosphatidylinositol 3,4,5-trisphosphate accumulation, Akt activation, actin polymerization, and cAMP production. Our results suggest that CnrN is a protein with some similarities to PTEN and that it regulates cAMP signal transduction to regulate territory size.