The inhibitor of Bruton tyrosine kinase γ (IBtkγ) is a negative regulator of the Bruton tyrosine kinase (Btk), which plays a major role in B-cell differentiation; however, the mechanisms of IBtkγ-mediated regulation of Btk are unknown. Here we report that B-cell receptor (BCR) triggering caused serine-phosphorylation of IBtkγ at protein kinase C consensus sites and dissociation from Btk. By liquid chromatography and mass-mass spectrometry and functional analysis, we identified IBtkγ-S87 and -S90 as the critical amino acid residues that regulate the IBtkγ binding affinity to Btk. Consistently, the mutants IBtkγ carrying S87A and S90A mutations bound constitutively to Btk and down-regulated Ca(2+) fluxes and NF-κB activation on BCR triggering. Accordingly, spleen B cells from Ibtkγ(-/-) mice showed an increased activation of Btk, as evaluated by Y551-phosphorylation and sustained Ca(2+) mobilization on BCR engagement. These findings identify a novel pathway of Btk regulation via protein kinase C phosphorylation of IBtkγ.