The mammalian phosphatidylcholine-specific phospholipase D (PLD) enzymes PLD1 and PLD2 have been proposed to play roles in signal transduction and membrane vesicular trafficking in distinct subcellular compartments. PLD1 is activated in a synergistic manner in vitro by protein kinase C-alpha, ADP-ribosylation factor 1 (ARF1), and Rho family members. In contrast, PLD2 is constitutively active in vitro. We describe here molecular analysis of PLD2. We show that the NH2-terminal 308 amino acids are required for PLD2's characteristic high basal activity. Unexpectedly, PLD2 lacking this region becomes highly responsive to ARF proteins and displays a modest preference for activation by ARF5. Chimeric analysis of PLD1 and PLD2 suggests that the ARF-responsive region is in the PLD carboxyl terminus. We also inserted into PLD2 a region of sequence unique to PLD1 known as the "loop" region, which had been proposed initially to mediate effector stimulation but that subsequently was shown instead to be required in part for the very low basal activity characteristic of PLD1. The insertion decreased PLD2 activity, consistent with the latter finding. Finally, we show that the critical role undertaken by the conserved carboxyl terminus is unlikely to involve promoting PLD association with membrane surfaces.