NHERF-1 (Na(+)-H(+) exchanger regulatory factor 1, also known as EBP50 ezrin-binding protein of 50 kDa) is a phosphoprotein that assembles multiprotein complexes via two PDZ domains and a C-terminal ezrin-binding domain. Current work utilized metabolic labeling in cultured cells expressing wild type GFP-NHERF-1 to define the physiological importance of NHERF-1 phosphorylation. Treatment of cells with phosphatase inhibitors calyculin A and okadaic acid enhanced NHERF-1 phosphorylation and inhibited its dimerization. Eliminating C-terminal serines abolished the modulation of NHERF-1 dimerization by phosphatase inhibitors and identified the phosphorylation of the PDZ1 domain that attenuated its binding to physiological targets, including beta(2)-adrenergic receptor, platelet-derived growth factor receptor, cystic fibrosis transmembrane conductance regulator, and sodium-phosphate cotransporter type IIa. The major covalent modification of PDZ1 was mapped to serine 77. Confocal microscopy of cultured cells suggested key roles for PDZ1 and ERM-binding domain in localizing NHERF-1 at the cell surface. The substitution S77A eliminated PDZ1 phosphorylation and increased NHERF-1 localization at the cell periphery. In contrast, S77D reduced NHERF-1 colocalization with cortical actin cytoskeleton. These data suggested that serine 77 phosphorylation played key role in modulating NHERF-1 association with plasma membrane targets and identified a novel mechanism by which PDZ1 phosphorylation may transduce hormonal signals to regulate the function of membrane proteins in epithelial tissues.