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 (Palphabeta) is inhibited by two gamma subunits (Pgamma). Previous results have established that approximately 5-7 C-terminal residues of Pgamma comprise the inhibitory domain. To study the interaction between the Pgamma C-terminal region and Palphabeta, the Pgamma mutant (Cys68 --> Ser, and the last 4 C-terminal residues replaced with cysteine, Pgamma-1-83Cys) was labeled with the fluorescent probe 3-(bromoacetyl)-7-diethylaminocoumarin (BC) at the cysteine residue (Pgamma-1-83BC). Pgamma-1-83BC was a more potent inhibitor of PDE activity than the unlabeled mutant, suggesting that the fluorescent probe in part substitutes for the Pgamma C terminus in PDE inhibition. HoloPDE (Palphabetagamma2) had no effect on the Pgamma-1-83BC fluorescence, but the addition of Palphabeta to Pgamma-1-83BC resulted in an approximately 8-fold maximal fluorescence increase. A Kd for the Pgamma-1-83BC-Palphabeta interaction was 4.0 +/- 0.5 nM. Zaprinast, a specific competitive inhibitor of PDE, effectively displaced the Pgamma-1-83BC C terminus from its binding site on Palphabeta (IC50 = 0.9 microM). cGMP and its analogs, 8-Br-cGMP and 2'-butyryl-cGMP, also competed with the Pgamma-1-83BC C terminus for binding to Palphabeta. Our results provide new insight into the mechanism of PDE inhibition by showing that Pgamma blocks the binding of cGMP to the PDE catalytic site.