Binding of different regulatory subunits and methylation of the catalytic (C) subunit carboxy-terminal leucine 309 are two important mechanisms by which protein phosphatase 2A (PP2A) can be regulated. In this study, both genetic and biochemical approaches were used to investigate regulation of regulatory subunit binding by C subunit methylation. Monoclonal antibodies selectively recognizing unmethylated C subunit were used to quantitate the methylation status of wild-type and mutant C subunits. Analysis of 13 C subunit mutants showed that both carboxy-terminal and active site residues are important for maintaining methylation in vivo. Severe impairment of methylation invariably led to a dramatic decrease in Balpha subunit binding but not of striatin, SG2NA, or polyomavirus middle tumor antigen (MT) binding. In fact, most unmethylated C subunit mutants showed enhanced binding to striatin and SG2NA. Certain carboxy-terminal mutations decreased Balpha subunit binding without greatly affecting methylation, indicating that Balpha subunit binding is not required for a high steady-state level of C subunit methylation. Demethylation of PP2A in cell lysates with recombinant PP2A methylesterase greatly decreased the amount of C subunit that could be coimmunoprecipitated via the Balpha subunit but not the amount that could be coimmunoprecipitated with Aalpha subunit or MT. When C subunit methylation levels were greatly reduced in vivo, Balpha subunits were found complexed exclusively to methylated C subunits, whereas striatin and SG2NA in the same cells bound both methylated and unmethylated C subunits. Thus, C subunit methylation is critical for assembly of PP2A heterotrimers containing Balpha subunit but not for formation of heterotrimers containing MT, striatin, or SG2NA. These findings suggest that methylation may be able to selectively regulate the association of certain regulatory subunits with the A/C heterodimer.