RGS proteins (regulators of G protein signaling) attenuate heterotrimeric G protein signaling by functioning as both GTPase-activating proteins (GAPs) and inhibitors of G protein/effector interaction. RGS2 has been shown to regulate Galpha(q)-mediated inositol lipid signaling. Although purified RGS2 blocks PLC-beta activation by the nonhydrolyzable GTP analog guanosine 5'-O-thiophosphate (GTPgammaS), its capacity to regulate inositol lipid signaling under conditions where GTPase-promoted hydrolysis of GTP is operative has not been fully explored. Utilizing the turkey erythrocyte membrane model of inositol lipid signaling, we investigated regulation by RGS2 of both GTP and GTPgammaS-stimulated Galpha(11) signaling. Different inhibitory potencies of RGS2 were observed under conditions assessing its activity as a GAP versus as an effector antagonist; i.e. RGS2 was a 10-20-fold more potent inhibitor of aluminum fluoride and GTP-stimulated PLC-betat activity than of GTPgammaS-promoted PLC-betat activity. We also examined whether RGS2 was regulated by downstream components of the inositol lipid signaling pathway. RGS2 was phosphorylated by PKC in vitro to a stoichiometry of approximately unity by both a mixture of PKC isozymes and individual calcium and phospholipid-dependent PKC isoforms. Moreover, RGS2 was phosphorylated in intact COS7 cells in response to PKC activation by 4beta-phorbol 12beta-myristate 13alpha-acetate and, to a lesser extent, by the P2Y(2) receptor agonist UTP. In vitro phosphorylation of RGS2 by PKC decreased its capacity to attenuate both GTP and GTPgammaS-stimulated PLC-betat activation, with the extent of attenuation correlating with the level of RGS2 phosphorylation. A phosphorylation-dependent inhibition of RGS2 GAP activity was also observed in proteoliposomes reconstituted with purified P2Y(1) receptor and Galpha(q)betagamma. These results identify for the first time a phosphorylation-induced change in the activity of an RGS protein and suggest a mechanism for potentiation of inositol lipid signaling by PKC.