Phosphodiesterase 4 (PDE4), the primary cAMP-hydrolyzing enzyme in cells, is a promising drug target for a wide range of conditions. Here we present seven co-crystal structures of PDE4 and bound inhibitors that show the regulatory domain closed across the active site, thereby revealing the structural basis of PDE4 regulation. This structural insight, together with supporting mutagenesis and kinetic studies, allowed us to design small-molecule allosteric modulators of PDE4D that do not completely inhibit enzymatic activity (I_max ∼ 80–90%). These allosteric modulators have reduced potential to cause emesis, a dose-limiting side effect of existing active site–directed PDE4 inhibitors, while maintaining biological activity in cellular and in vivo models. Our results may facilitate the design of CNS therapeutics modulating cAMP signaling for the treatment of Alzheimer's disease, Huntington's disease, schizophrenia and depression, where brain distribution is desired for therapeutic benefit.