Phosphatidylinositol-specific phospholipase C (PLC) enzymes catalyze the hydrolysis of phosphatidylinositol 4,5 bisphosphate in a two step reaction that involves a cyclic intermediate. The PLCbetafamily are activated by both the alpha and betagamma subunits of heterotrimeric G proteins. To determine which catalytic step is affected by Gbetagamma subunits, we compared the change in PLCbeta(2) activity catalysis toward monomeric short-chain phosphatidylinositol (PI) substrates and monomeric water-soluble cyclic inositol phosphates as well as long-chain PI in bilayer and micellar interfaces in the absence and presence of Gbetagammasubunits. Unlike other PLC enzymes, no cyclic products were detected for either wild-type PLCbeta(2) or a chimeric protein composed of the PH domain of PLCbeta(2) and the catalytic domain of PLCdelta(1). Using cIP as a substrate to examine the second step of the reaction, we found that the presence of Gbetagamma subunits stimulated this step by a higher level than that for the overall reaction (k(cat) 1.5-fold (cIP) as opposed to 1.20-fold for soluble diC(4)PI). Detergents above their CMC can generate the same kinetic activation of PLCbeta(2) as Gbetagamma, suggesting that hydrophobic compounds stabilize the activated state of the enzyme. The most pronounced effect of Gbetagamma is that it relieves competitive product inhibition. Taken together, our results show that activation of PLCbeta(2) occurs through enhancement in the catalytic rate of hydrolysis of the cyclic intermediate and increased product release, and that hydrophobic interactions play a key role.