In the presence of ATP and Mg2+, the homogeneous ATPase peptide inhibitor of rat liver mitochondria markedly inhibits the proton ATPase from this source (Cintrón N. M., and Pedersen, P. L. (1979) J. Biol. Chem. 254, 3439-3443). Under these conditions, calmodulin prevents the inhibitor peptide from inhibiting the liver H+-ATPase. About 1.5 mol of calmodulin/mol of inhibitor is necessary to effect a half-maximal response (apparent Km = 0.5 microM calmodulin). The capacity of calmodulin to neutralize the action of the ATPase inhibitor peptide appears highly specific. This effect is not produced by insulin, trypsin inhibitor, lysozyme, ribonuclease, myoglobin, cytochrome c, ovalbumin, or bovine albumin. Only polyglutamate was found to mimic the action of calmodulin. However, when added together with calmodulin, polyglutamate failed to elicit an additive effect indicating that its site of interaction on the ATPase inhibitor peptide differs from that of calmodulin. Calcium is not essential in the assay medium for calmodulin to neutralize the action of the ATPase inhibitor peptide. The neutralization effect produced by calmodulin is also source-independent, with preparations of calmodulin from bovine brain and rat testes being equally competent. Calmodulin has no direct effect on the ATPase activity of the proton ATPase, nor does it affect the capacity of the enzyme to participate in either ATP synthesis or the ATP-dependent transhydrogenase reaction. Moreover, calmodulin fails to reverse inhibition of the H+-ATPase to which ATPase inhibitor peptide is already bound. Overall, these results indicate that calmodulin interacts in a direct and highly specific manner with the "free" ATPase peptide inhibitor of rat liver mitochondria.