Abstract: A downhole activated circulating sub is adapted to be interconnected between various tools installed on coiled tubing and placed into a wellbore; for example, between a coiled tubing/measurement while drilling tool and a downhole motor/drill bit for drilling a wellbore. The circulating sub can be repeatedly set and reset while the circulating sub is disposed in the wellbore. As a result, it is not necessary to retrieve the circulating sub to the wellbore surface for the purpose of resetting the sub. The circulating sub includes a latch mechanism which locks and latches the sub in either a set condition or a reset condition when a fluid is pumped through the circulating sub. When fluid flow through the circulating sub stops, the latch mechanism is unlocked and the circulating sub can change between the set condition and the reset condition.