Calcineurin was discovered as an inhibitor of calmodulin stimulated cyclic AMP phosphodiesterase and its ability to act as a calmodulin binding protein largely explains its inhibitory action on calmodulin regulated enzymes. Recent studies establish calcineurin as the enzyme protein phosphatase whose activity is regulated by calmodulin and a variety of divalent metals. In this work, we have investigated the effects of several agents including sulfhydryl agents, trifluoperazine (a calmodulin antagonist), PPi, NaF and orthovanadate and of tryptic proteolysis on the calcineurin inhibition of cyclic AMP phosphodiesterase (called inhibitory activity) and on protein phosphatase activity. Inhibitors for sulfhydryl groups (pHMB, NEM) inhibited phosphatase activity without any effect on the inhibitory activity. Dithioerythritol completely reversed the inhibition by pHMB. Limited proteolysis of calcineurin caused an activation of basal phosphatase activity with a complete loss of inhibitory activity. Phosphatase activity of the proteolyzed calcineurin was not stimulated by calmodulin. The presence of calmodulin along with calcineurin during tryptic digestion appeared to preserve the stimulation of phosphatase by Ca2(+)-calmodulin. [3H]-Trifluoperazine (TFP) was found to be incorporated irreversibly into calcineurin in the presence of ultraviolet light. This incorporation was evident into the A and B subunits of calcineurin. TFP-caused a decrease in the phosphatase activity and an increase in its inhibitory activity. [3H]-TFP incorporation into the A subunit was drastically decreased in the proteolyzed calcineurin. This was also true when the [3H]-TFP incorporated calcineurin was subjected to tryptic proteolysis. The incorporation into the B unit was essentially unaffected in the trypsinized calcineurin. Phosphatase activity was inhibited by orthovanadate, NaF, PPi, and EDTA. Inhibitions by these compounds were more pronounced when the phosphatase was determined in the presence of Ca2(+)-calmodulin than in their absence.