In the dark, the activity of the cGMP phosphodiesterase (PDE) of retinal rod outer segments is held in check by its two inhibitory gamma-subunits. Following illumination, gamma is rapidly removed from its inhibitory site by transducin, the G-protein of the visual system. In order to probe the functional roles of specific regions in the PDE(gamma) primary sequence, 10 variants of PDE(gamma) have been produced by site-specific mutagenesis and expression in bacteria and their properties compared to those of protein containing the wild-type bovine PDE(gamma) amino acid sequence. Three questions were asked about each mutant: What is its affinity for the alpha-beta-catalytic subunit of PDE? Does it inhibit catalytic activity? If so, can transducin relieve this inhibition? Binding to PDE(alpha-beta) was determined directly using fluorescein-labeled-gamma by measuring the increase in emission anisotropy that occurs when gamma-binds to alpha-beta. Inhibition of PDE(alpha-beta) was measured by reconstitution of the gamma-variants with gamma-free PDE generated by limited digestion with trypsin or endoproteinase Arg-C. Unlike trypsin, the latter enzyme did not remove PDE's ability to bind membranes and be activated by transducin, so that transducin activation of PDE containing specific gamma-variants could be assayed directly. The results indicate that mutations in many regions of gamma-affect its binding to alpha-beta. A mutant missing the last five carboxy-terminal residues (83-87) was totally lacking in inhibitory activity. However, it still bound to PDE(alpha-beta) tightly, although with a 100-fold lower dissociation constant (approximately 5 nM) than that of wild-type-gamma (approximately 50 pM). Thus, when added in sufficient excess over endogenous-gamma, this mutant was capable of activating holo-PDE. A mutant in which lysines 41, 44, and 45 were replaced with glutamines bound to PDE(alpha-beta) and inhibited catalytic activity with similar affinity to that of wild-type-gamma. However, inhibition by this mutant was poorly relieved by activated transducin; PDE reconstituted with this mutant was stimulated 10-fold less by 1.5-mu-M transducin than was PDE reconstituted with wild-type-gamma. These results suggest a critical role for Lys41, Lys44, and Lys45 in activation by transducin and for the carboxy terminus in PDE(alpha-beta) inhibition, while identifying other residues that make relatively small but measurable contributions to binding of PDE(gamma) to PDE(alpha-beta).