Several cell surface receptors including the T cell receptor (TCR) are phosphorylated and down-regulated following activation of protein kinases. We have recently shown that both phosphorylation of Ser-126 and the presence of the di-leucine sequence Leu-131 and Leu-132 in CD3 gamma are required for protein kinase C (PKC)-mediated TCR down-regulation. To identify additional residues required for PKC-mediated phosphorylation of CD3 gamma and for TCR down-regulation, an alanine scanning of CD3 gamma was done. Mutations of Arg-124, Ser-126, Lys-128, and Gln-129 inhibited both phosphorylation and TCR down-regulation, whereas mutation of Asp-127 only inhibited down-regulation. Further analyses demonstrated a discrepancy between the ability to be phosphorylated on CD3 gamma and to down-regulate the TCR in several transfectants. Phosphorylation was not as strictly dependent on the nature and position of the phosphoacceptor group and basic residues as were the subsequent steps involved in TCR down-regulation. Our results suggest that PKC-mediated TCR down-regulation may be regarded as a two-step process. 1) Recognition and phosphorylation of CD3 gamma by PKC. In this process Arg-124, Ser-126, Lys-128, and Gln-129 are important. 2) Recognition of phosphorylated CD3 gamma by molecules involved in receptor internalization. In this process Ser(P)-126, Asp-127, Leu-131, and Leu-132 are important.