The myristoylated aline-rich protein kinase C substrate (MARCKS) is a peripheral membrane protein that undergoes phosphorylation-dependent translocation between membrane and cytosol. MARCKS binds to acidic phospholipids with high affinity (Kd less than 0.5 microM) but binds poorly to neutral phospholipids. Although interaction of MARCKS with acidic phospholipids lacks specificity when determined by binding assay, these phospholipids exert distinctive effects on the phosphorylation of this protein by protein kinase C (PKC). Preincubation of MARCKS with phosphatidylserine (PS) or phosphatidylglycerol enhanced the phosphorylation; whereas with phosphatidic acid, phosphatidylinositol (PI), phosphatidylinositol-4-phosphate, or phosphatidylinositol-4,5-biphosphate inhibited the phosphorylation of this substrate by PKC. Phosphoinositide inhibition of MARCKS phosphorylation was apparently directed at the substrate rather than at the kinase as the phosphorylation of two other phospholipid-binding PKC substrates, neuromodulin and neurogranin, exhibited different responses from those of MARCKS. Furthermore, the inhibition of phosphoinositides on MARCKS phosphorylation was seen with PKC isozymes alpha, beta, gamma, and delta and with the catalytic fragment of PKC, protein kinase M. A 25-amino-acid synthetic peptide corresponding to the phosphorylation site domain (PSD) of MARCKS, but not to the myristoylated N-terminal peptide, competed equally effectively with MARCKS in binding to either PS- or PI-containing vesicles, suggesting that both phospholipids bind to the PSD of MARCKS. Binding of PI to MARCKS inhibited PKC phosphorylation of all three phosphorylation sites. These results suggest that phosphoinositides and PS bind at different residues within the MARCKS PSD, so that the resulting phospholipid/MARCKS complexes are differentially phosphorylated by PKC.