A putative palmitoylation site, Cys457, of muscarinic acetylcholine receptor m2 subtype (m2 receptor) was eliminated by conversion to alanine or stop codon by site-directed mutagenesis. The mutant m2 receptor C457A was not metabolically labeled with [3H] palmitic acid when expressed in Sf9 cells, whereas the wild-type m2 receptor was labeled under the same conditions. These results confirm that the Cys457 is the palmitoylation site. The rate of palmitoylation was markedly accelerated by addition of agonist, indicating that the palmitoylation reaction is affected by conformational changes of the receptor induced by agonist binding. The m2 receptor mutants without palmitoylation were purified and reconstituted with G proteins into phospholipid vesicles. Both mutants were good substrates of G protein-coupled receptor kinase 2 and the phosphorylation was stimulated by agonist and G protein beta gamma subunits, as was the case for wild-type receptors. The mutant receptors interacted with and activate Gi2 and G(o). However, the rate of [35S] GTP gamma S binding to Gi2 was half as much for the mutants as that for the wild type, and the proportion of guanine nucleotide-sensitive high-affinity agonist binding sites was significantly less for mutants (42-42%) compared to wild type (62%). These results indicate that the palmitoylation of m2 receptors is not an absolute requirement for their interaction with G proteins but enhances the ability of the receptors to interact with G proteins.