The G protein betagamma complex regulates a wide range of effectors, including the phospholipase Cbeta isozymes (PLCbetas). Prenyl modification of the gamma subunit is necessary for this activity. Evidence presented here supports a direct interaction between the G protein gamma subunit prenyl group and PLCbeta isozymes. A geranylgeranylated peptide corresponding to the C-terminal region of the gamma subunit type, gamma2, strongly inhibits stimulation of PLCbeta2 and PLCbeta3 activity by the betagamma complex. This effect is specific because the same peptide has no effect on stimulation of PLCbeta by an alpha subunit type, alphaq. Prenylation of the gamma peptide is required for its inhibitory effect. When interaction of prenylated gamma subunit peptide to fluorophore-tagged PLCbeta2 was examined by fluorescence spectroscopy, prenylated but not unprenylated peptide increased PLCbeta2 fluorescence emission energy, indicating direct binding of the prenyl moiety to PLCbeta. In addition, fluorescence resonance energy transfer was detected between fluorophore tagged PLCbeta and wild type betagamma complex but not an unprenylated mutant betagamma complex. We conclude that a major function of the gamma subunit prenyl group is to facilitate direct protein-protein interaction between the betagamma complex and an effector, phospholipase Cbeta.