We wished to determine if the two nucleotide-binding domains (NBD) of P-glycoprotein are functionally equivalent and interchangeable, and if not, which segments and amino acids are important for proper function of each NBD within the context of the C- or N-terminal P-glycoprotien halves. For this, we constructed and tested the biological activity in yeast and mammalian cells of a series of chimeric mdr3 cDNAs in which discrete domains of the N-terminal NBD (NBD1) were replaced by the homologous segments of the C-terminal NBD (NBD2). Although most NBD1 segments could be replaced without loss of P-glycoprotein function, exchange of small segments near the Walker B motif caused a dramatic reduction in Adriamycin, actinomycin D, and colchicine resistance in LR73 cells, as well as in FK506 resistance and STE6 complementation in yeast. Site-directed mutagenesis identified amino acid positions 522-525 (ERGA-->DKGT) and 578 (Thr-->Cys) as essential for proper function of NBD1 in the context of the N-terminal half P-glycoprotein. In addition, the observed phenotype of the mutants (altered drug resistance profile) suggests that these residues may participate directly or indirectly in substrate interactions and are possibly implicated in signal transduction from NBDs to transmembrane domains, the primary sites of drug binding in P-glycoprotein.