The function of protein kinase C family members depends on two tightly coupled phosphorylation mechanisms: phosphorylation of the activation loop by the phosphoinositide-dependent kinase, PDK-1, followed by autophosphorylation at two positions in the COOH terminus, the turn motif, and the hydrophobic motif. Here we address the molecular mechanisms underlying the regulation of protein kinase C betaII by PDK-1. Co-immunoprecipitation studies reveal that PDK-1 associates preferentially with its substrate, unphosphorylated protein kinase C, by a direct mechanism. The exposed COOH terminus of protein kinase C provides the primary interaction site for PDK-1, with co-expression of constructs of the carboxyl terminus effectively disrupting the interaction in vivo. Disruption of this interaction promotes the autophosphorylation of protein kinase C, suggesting that the binding of PDK-1 to the carboxyl terminus protects it from autophosphorylation. Studies with constructs of the COOH terminus reveal that the intrinsic affinity of PDK-1 for phosphorylated COOH terminus is over an order of magnitude greater than that for unphosphorylated COOH terminus, contrasting with the finding that PDK-1 does not bind phosphorylated protein kinase C effectively. However, effective binding of the phosphorylated species can be induced by the activated conformation of protein kinase C. This suggests that the carboxyl terminus becomes masked following autophosphorylation, a process that can be reversed by the conformational changes accompanying activation. Our data suggest a model in which PDK-1 provides two points of regulation of protein kinase C: 1) phosphorylation of the activation loop, which is regulated by the intrinsic activity of PDK-1, and 2) phosphorylation of the carboxyl terminus, which is regulated by the release of PDK-1 to allow autophosphorylation.