The C2 domain in protein kinase C (PKC) is homologous to equivalent domains in a number of important cytoplasmic proteins. Except for its implied function in Ca2+ and phospholipid binding, the precise role of this domain is not well understood. We examined the role of the C2 domain of PKC-alpha using a mutant enzyme in which 80% of this domain has been deleted. This mutant can be activated by phospholipid and diacylglycerol, but is independent of Ca2+. In this regard, its characteristics are similar to those of the novel PKCs (nPKCs), consistent with the notion that the C2 domain of PKC confers its Ca2+ responsiveness. However, when the C2 deletion mutant is activated by cis-unsaturated fatty acid, the activity is strongly inhibited by Ca2+ at micromolar concentrations. The Ca2+ inhibition is dose-dependent and is specific to cis-unsaturated fatty acids. The deletion mutant can also be activated synergistically by diacylglycerol and cis-fatty acid, but again activation is inhibited by Ca2+. Our results indicate that a PKC lacking the C2 domain is Ca2+-responsive and there exists an additional site for Ca2+ that modulates the sensitivity of the enzyme to cis-unsaturated fatty acid but not to diacylglycerol. This modulatory Ca2+-binding site appears to be suppressed by the C2 domain because the presence of the domain reverses the direction of PKC activity induced by cis-unsaturated fatty acid. These results suggest that the modulatory Ca2+-binding site could act as a molecular switch selective for fatty acid activation by sensing the changes in the Ca2+ levels in a cell, serving a possible mechanism of differential activation of cPKC with a C2 domain and nPKC lacking this domain.