We have found NAD to be rapidly degraded by extracellular enzymes present on intact rat brain synaptosomes. The enzyme involved had the specificity of an NADase cleaving the molecule at the nicotinamide-glycoside linkage and was inhibited by nicotinamide mononucleotide (NMN). This inhibitor did not displace specific binding of NAD to rat brain membranes or affect electrical activity in the guinea pig hippocampus. Therefore, inclusion of NMN in binding assays allowed unambiguous demonstration of two specific NAD binding sites on rat brain synaptosomal membranes (KD1, 82 nM, KD2, 1.98 microM). The depressant action of NAD on the evoked synaptic activity of the guinea pig hippocampus was not blocked after inhibition of NAD degradation with NMN. The physiological implications of these results for the function of NAD as a neurotransmitter or neuromodulator in the CNS are discussed.