The transient receptor potential canonical type 5 (TRPC5) channel is a member of the channels that has been implicated in neurite extension and growth cone morphology of hippocampal neurons. Although homomeric TRPC5 channels are activated following stimulation of G(q/11)-coupled receptors, the exact mechanism for this activation remains unresolved. Using two-electrode voltage clamp recordings, we show that the activity of TRPC5 channels expressed in Xenopus oocytes is dependent on the presence of Ca2+ at the extracellular as well as the cytoplasmic side of the plasma membrane. TRPC5 was activated by the stimulation of coexpressed M5 muscarinic receptors or by ionomycin. The TRPC5 activity was detectable with the presence of submillimolar levels of extracellular Ca2+, but it was eliminated by the injection of 5 mM 1,2-bis(o-aminophenoxy)ethane-N,N,N',N'-tetraacetic acid into the oocytes. Lanthanum could substitute for extracellular Ca2+ to support TRPC5 activity. Coexpression of Ca2+-binding protein 1 (CaBP1), but not calmodulin (CaM), inhibited the TRPC5 activity, without affecting the cell surface expression of TRPC5 proteins. Using in vitro binding assays, we demonstrated direction interactions between CaBP1 and TRPC5. The CaBP1-binding sites at the C terminus of TRPC5 are closely localized, but not identical, to CaM-binding sites. We conclude that TRPC5 is a Ca2+-regulated channel, and its activity is negatively controlled by CaBP1.