Cyclic GMP phosphodiesterase (PDE) is the effector enzyme in the visual transduction cascade of vertebrate photoreceptor cells, In the dark, the activity of the enzyme catalytic alpha and beta subunits (P alpha beta) is inhibited by two gamma subunits (P gamma). Previous results have established that approximately 5-7 C-terminal residues of P gamma comprise the inhibitory domain, To study the interaction between the P gamma C-terminal region and P alpha beta, the P gamma mutant (Cys(68) --> Ser, and the last 4 C-terminal residues replaced with cysteine, P gamma-1-83Cys) was labeled with the fluorescent probe 3-(bromoacetyl)-7-diethylaminocoumarin (BC) at the cysteine residue (P gamma-1-83BC). P gamma-1-83BC was a more potent inhibitor of PDE activity than the unlabeled mutant, suggesting that the fluorescent probe in part substitutes for the P gamma C terminus in PDE inhibition, HoloPDE (P alpha beta gamma) had no effect on the P gamma-1-83BC fluorescence, but the addition of P alpha beta to P gamma-1-83BC resulted in an approximately 8-fold maximal fluorescence increase. A K-d for the P gamma-1-83BC-P alpha beta interaction was 4.0 +/- 0.5 nM. Zaprinast, a specific competitive inhibitor of PDE, effectively displaced the P gamma-1-83BC C terminus from its binding site on P alpha beta (IC50 = 0.9 mu M). cGMP and its analogs, 8-Br-cGMP and 2'-butyryl-cGMP, also competed with the P gamma-1-83BC C terminus for binding to P alpha beta. Our results provide new insight into the mechanism of PDE inhibition by showing that P gamma blocks the binding of cGMP to the PDE catalytic site.