The activity of ATP-sensitive potassium (K(ATP)) channels is governed by the concentration of intracellular ATP and ADP and is thus responsive to the metabolic status of the cell. Phosphorylation of K(ATP) channels by protein kinase A (PKA) or protein kinase C (PKC) results in the modulation of channel activity and is particularly important in regulating smooth muscle tone. At the molecular level the smooth muscle channel is composed of a sulfonylurea subunit (SUR2B) and a pore-forming subunit Kir6.1 and/or Kir6.2. Previously, Kir6.1/SUR2B channels have been shown to be inhibited by PKC, and Kir6.2/SUR2B channels have been shown to be activated or have no response to PKC. In this study we have examined the modulation of channel complexes formed of the inward rectifier subunit, Kir6.2, and the sulfonylurea subunit, SUR2B. Using a combination of biochemical and electrophysiological techniques we show that this complex can be inhibited by protein kinase C in a Ca(2+)-dependent manner and that this inhibition is likely to be as a result of internalization. We identify a residue in the distal C terminus of Kir6.2 (Ser-372) whose phosphorylation leads to down-regulation of the channel complex. This inhibitory effect is distinct from activation which is seen with low levels of channel activity.