PDE6 (type 6 phosphodiesterase) from rod outer segments consists of two types of catalytic subunits, alpha and beta; two inhibitory gamma subunits; and one or more delta subunits found only on the soluble form of the enzyme. About 70% of the phosphodiesterase activity found in rod outer segments is membrane-bound, and is thought to be anchored to the membrane through C-terminal prenyl groups. The recombinant delta subunit has been shown to solubilize the membrane-bound form of the enzyme. This paper describes the site and mechanism of this interaction in more detail. In isolated rod outer segments, the delta subunit was found exclusively in the soluble fraction, and about 30% of it did not coimmunoprecipitate with the catalytic subunits. The delta subunit that was bound to the catalytic subunits dissociated slowly, with a half-life of about 3.5 h. To determine whether the site of this strong binding was the C-termini of the phosphodiesterase catalytic subunits, peptides corresponding to the C-terminal ends of the alpha and beta subunits were synthesized. Micromolar concentrations of these peptides blocked the phosphodiesterase/delta subunit interaction. Interestingly, this blockade only occurred if the peptides were both prenylated and methylated. These results suggested that a major site of interaction of the delta subunit is the methylated, prenylated C-terminus of the phosphodiesterase catalytic subunits. To determine whether the catalytic subunits of the full-length enzyme are methylated in situ when bound to the delta subunit, we labeled rod outer segments with a tritiated methyl donor. Soluble phosphodiesterase from these rod outer segments was more highly methylated (4.5 +/- 0.3-fold) than the membrane-bound phosphodiesterase, suggesting that the delta subunit bound preferentially to the methylated enzyme in the outer segment. Together these results suggest that the delta subunit/phosphodiesterase catalytic subunit interaction may be regulated by the C-terminal methylation of the catalytic subunits.