We investigated the role of intracellular Mg2+ (Mg-i(2+)) on the ATP regulation of Na+/Ca2+ exchanger in squid axons and bovine heart. In squid axons and nerve vesicles, the ATP-upregulated exchanger remains activated after removal of cytoplasmic Mg2+, even in the absence of ATP. Rapid and complete deactivation of the ATP-stimulated exchange occurs upon readmission of Mg-i(2+). At constant ATP concentration, the effect of intracellular Mg2+ concentration ([Mg2+](i))on the ATP regulation of exchanger is biphasic: activation at low [Mg2(+)](i), followed by deactivation as [Mg2+](i) is increased. No correlation was found between the above results and the levels of phosphatidylinositol 4-phosphate and phosphatidylinositol 4,5-bisphosphate [PtdIns(4,5)P-2] measured in nerve membrane vesicles. Incorporation of PtdIns( 4,5)P-2 into membrane vesicles activates Na+/Ca2+ exchange in mammalian heart but not in squid nerve. Moreover, an exogenous phosphatase prevents MgATP activation in squid nerves but not in mammalian heart. It is concluded that 1) Mg-i(2+) is an essential cofactor for the deactivation part of ATP regulation of the exchanger and 2) the metabolic pathway of ATP upregulation of the Na+/Ca2+ exchanger is different in mammalian heart and squid nerves.