Diversity of γ-aminobutyrate type A (GABA(A)) receptors has recently been proposed to be achieved by assembly of receptor subtypes from a multitude of subunits (α1-6, β1-3, γ1-2, and δ) encoded by different genes. Here we report a further mechanism for creating GABA(A) receptor diversity: alternative RNA splicing. Two forms of bovine γ2 subunit cDNA were isolated (γ2S and γ2L) that differed by the presence or absence of a 24-base-pair (8-amino acid) insertion in the cytoplasmic domain between the third and fourth putative membrane-spanning regions. Polymerase chain reaction from RNA demonstrated that the two forms of γ2 subunit are expressed in bovine, human, and rat brain. Sequencing of genomic DNA clones encoding the γ2 subunit demonstrated that the 24-base-pair insert is organized as a separate exon. Analysis of the sequence of the 8-amino acid insert revealed that it contains a protein kinase C consensus phosphorylation site. Expression of the large cytoplasmic loop domains of γ2S and γ2L in Escherichia coli, followed by phosphorylation of the recombinant proteins by protein kinase C, demonstrated that γ2L, but not γ2S, could be phosphorylated. Thus the two forms of γ2 subunit differ by the presence or absence of a protein kinase C phosphorylation site. This mechanism for creating GABA(A) receptor diversity may allow differential regulation of the function of receptor subtypes.