In this study, we assessed the role of annexin V, a Ca2+-dependent phospholipid-binding protein, as a regulator of protein kinase C (PKC) and characterized its mechanism of inhibition. Several mutants obtained by oligonucleotide site-directed mutagenesis were tested in vitro on PKC activity in cytosolic fractions from Jurkat cells and on purified PKCalpha. Annexin V inhibited phosphorylation of annexin II by endogenous PKC and phosphorylation of myelin basic protein by PKCalpha. In both systems, the use of single Ca2+-binding-site mutants of annexin V led to a partial reversal of inhibition, and the Ca2+-binding site located in the first domain of annexin V was found to have the most important role. An increase in the number of mutated Ca2+-binding sites led to a greater loss of inhibition. These results corroborated those showing the progressive loss of binding of these mutants to phospholipid liposomes. In conclusion, we show that PKC inhibition by annexin V is the consequence of a mechanism involving phospholipid sequestration by annexin V, and that the Ca2+-binding site located in domain 1 of annexin V plays a predominant role in this process. In addition, we show that the R122AIK site, which may act analogously to a PKC-inhibitory pseudosubstrate site, is not involved in PKC inhibition, and that a peptide corresponding to the C-terminal tail of annexin V inhibits PKC activity but to a lesser extent than annexin V itself.