Heterotrimeric guanine nucleotide-binding protein (G protein)-coupled receptors are phosphorylated by kinases that mediate agonist-dependent receptor deactivation. Although many receptor kinases have been isolated, the corresponding phosphatases, necessary for restoring the ground state of the receptor, have not been identified. Drosophila RDGC (retinal degeneration C) is a phosphatase required for rhodopsin dephosphorylation in vivo. Loss of RDGC caused severe defects in the termination of the light response as well as extensive light-dependent retinal degeneration. These phenotypes resulted from the hyperphosphorylation of rhodopsin because expression of a truncated rhodopsin lacking the phosphorylation sites restored normal photoreceptor function. These results suggest the existence of a family of receptor phosphatases involved in the regulation of G protein-coupled signaling cascades.