Cyclic AMP (cAMP) and its main effector Protein Kinase A (PKA) are critical for several aspects of neuronal function including synaptic plasticity. Specificity of synaptic plasticity requires that cAMP activates PKA in a highly localized manner despite the speed with which cAMP diffuses. Two mechanisms have been proposed to produce localized elevations in cAMP, known as microdomains: impeded diffusion, and high phosphodiesterase (PDE) activity. This paper investigates the mechanism of localized cAMP signaling using a computational model of the biochemical network in the HEK293 cell, which is a subset of pathways involved in PKA-dependent synaptic plasticity. This biochemical network includes cAMP production, PKA activation, and cAMP degradation by PDE activity. The model is implemented in NeuroRD: novel, computationally efficient, stochastic reaction-diffusion software, and is constrained by intracellular cAMP dynamics that were determined experimentally by real-time imaging using an Epac-based FRET sensor (H30). The model reproduces the high concentration cAMP microdomain in the submembrane region, distinct from the lower concentration of cAMP in the cytosol. Simulations further demonstrate that generation of the cAMP microdomain requires a pool of PDE4D anchored in the cytosol and also requires PKA-mediated phosphorylation of PDE4D which increases its activity. The microdomain does not require impeded diffusion of cAMP, confirming that barriers are not required for microdomains. The simulations reported here further demonstrate the utility of the new stochastic reaction-diffusion algorithm for exploring signaling pathways in spatially complex structures such as neurons.