Amoebas and other protists commonly encyst when faced with environmental stress. Although little is known of the signaling pathways that mediate encystation, the analogous process of spore formation in dictyostelid social amoebas is better understood. In Dictyostelium discoideum, secreted cyclic AMP (cAMP) mediates the aggregation of starving amoebas and induces the differentiation of prespore cells. Intracellular cAMP acting on cAMP-dependent protein kinase (PKA) triggers the maturation of spores and prevents their germination under the prevalent conditions of high osmolality in the spore head. The osmolyte-activated adenylate cyclase, ACG, produces cAMP for prespore differentiation and inhibition of spore germination. To retrace the origin of ACG function, we investigated ACG gene conservation and function in species that span the dictyostelid phylogeny. ACG genes, osmolyte-activated ACG activity, and osmoregulation of spore germination were detected in species that represent the 4 major groups of Dictyostelia. Unlike the derived species D. discoideum, many basal Dictyostelia have retained the ancestral mechanism of encystation from solitary amoebas. In these species and in solitary amoebas, encystation is independently triggered by starvation or by high osmolality. Osmolyte-induced encystation was accompanied by an increase in cAMP and prevented by inhibition of PKA, indicating that ACG and PKA activation mediate this response. We propose that high osmolality signals drought in soil amoebas and that developmental cAMP signaling in the Dictyostelia has evolved from this stress response.