One of the challenges in understanding ciliary and flagellar motility is determining the mechanisms that locally regulate dynein-driven microtubule sliding. Our recent studies demonstrated that microtubule sliding, in Chlamydomonas flagella, is regulated by phosphorylation. However, the regulatory proteins remain unknown. Here we identify the 138-kD intermediate chain of inner arm dynein I1 as the critical phosphoprotein required for regulation of motility. This conclusion is founded on the results of three different experimental approaches. First, genetic analysis and functional assays revealed that regulation of microtubule sliding, by phosphorylation, requires inner arm dynein I1. Second, in vitro phosphorylation indicated the 138-kD intermediate chain of I1 is the only phosphorylated subunit. Third, in vitro reconstitution demonstrated that phosphorylation and dephosphorylation of the 138-kD intermediate chain inhibits and restores wild-type microtubule sliding, respectively. We conclude that change in phosphorylation of the 138-kD intermediate chain of I1 regulates dynein-driven microtubule sliding. Moreover, based on these and other data, we predict that regulation of I1 activity is involved in modulation of flagellar waveform.