Regulation of protein dephosphorylation by cytoplasmic Ca2+ levels and calmodulin (CaM) is well established and considered to be mediated solely by calcineurin. Yet. recent identification of protein phosphatases with EF-hand domains (PPEF/rdgC) point to the existence of another group of Ca2+-dependent protein phosphatases. We have recently hypothesised that PPEF/rdgC phosphatases might possess CaM-binding sites of the IQ-type in their N-terminal domains. We now employed yeast two-hybrid system and surface plasmon resonance (SPR) to test this hypothesis. We found that entire human PPEF2 interacts with Cam in the in vivo tests and that its N-terminal domain binds to CaM in a Ca2+-dependent manner with nanomolar affinity in vitro. The fragments corresponding to the second exons of PPEF1 and PPEF2. containing the IQ motifs, are sufficient for specific Ca2+-dependent interaction with CaM both in vivo and in vitro. These findings demonstrate the existence of mammalian CaM-binding protein Ser/Thr phosphatases distinct from calcineurin and suggest that the activity of PPEF phosphatases may be controlled by Ca2+ in a dual way: via C-terminal Ca2+-binding domain and via interaction of the N-terminal domain with CaM. (C) 2002 Elsevier Science (USA). All rights reserved.