STE2 encodes a component of the S. cerevisiae alpha-pheromone receptor that is essential for induction of physiological changes associated with mating. Analysis of C-terminal truncation mutants of STE2 demonstrated that the essential sequences for ligand binding and signal transduction are included within a region containing seven putative transmembrane domains. However, truncation of the C-terminal 105 amino acids of the receptor resulted in a 4- to 5-fold increase in cell-surface pheromone binding sites, a 10-fold increase in pheromone sensitivity, a defect in recovery of cell division after pheromone treatment, and a defect in pheromone-induced morphogenesis. Overproduction of STE2 resulted in about a 6-fold increase in alpha-pheromone binding capacity but did not produce the other phenotypes associated with the ste2-T326 mutant receptor. We conclude that the C-terminus of the receptor is responsible for one aspect of cellular adaptation to pheromone that is distinct from adaptation controlled by the SST2 gene, for decreasing the stability of the receptor, and for some aspect of cellular morphogenesis.