EGF inhibits carbachol-induced chloride secretion by regulating a basolateral potassium channel via phosphatidylinositol 3-kinase (PI 3-kinase) and PKCepsilon activation. Although both EGF and carbachol cause tyrosine phosphorylation of p85 of PI 3-kinase, only EGF activates the enzyme. Serine phosphorylation of p85 is thought to suppress the lipid kinase of PI 3-kinase. Our present study examined whether the differential effects of carbachol and EGF on PI 3-kinase activity correspond to varying phosphorylation of p85, and the mechanisms and consequences. T(84) colonic epithelial cells were treated with either EGF or carbachol. Cell lysates were immunoprecipitated with p85 antibody and blotted with either phosphotyrosine or phosphoserine antibodies. Protein phosphatase (PP) 1 and 2A activities were also measured. Both tyrosine and serine residues of p85 were phosphorylated by carbachol, whereas EGF induced only tyrosine phosphorylation. Moreover, EGF abolished carbachol-induced serine phosphorylation of p85 and activated PP2A without affecting PP1. Carbachol did not affect either phosphatase. Calyculin A or okadaic acid pretreatment reversed the inhibitory action of EGF on carbachol-induced chloride secretion and restored serine phosphorylation of p85. Although carbachol recruits p85, it phosphorylates both serine and tyrosine residues so that the lipid kinase of PI 3-kinase is inhibited. EGF results in p85 tyrosine phosphorylation as well as dephosphorylation of serine residues via the activation of PP2A. This explains the differential induction of PI 3-kinase enzyme activity in response to EGF and/or carbachol and has functional implications. Our data provide further insights into negative signals that regulate chloride secretion and into the molecular basis of signaling diversification in the intestinal epithelium.