Desensitization is a ubiquitous response of guanine nucleotide-binding protein-coupled receptors (GPCRs) characterized by the waning of effector activity despite continued presence of agonist. Binding of an arrestin to the activated, often phosphorylated GPCR triggers desensitization. We reported for the luteinizing hormone/choriogonadotropin receptor (LH/CG R) that beta-arrestin tightly bound to porcine ovarian follicular membranes mediates agonist-dependent desensitization of LH/CG R-stimulated adenylyl cyclase (AC) activity (Mukherjee, S., Palczewski, K., Gurevich, V. V., Benovic, J. L., Banga, J. P., and Hunzicker-Dunn, M. (1999) Proc. Natl. Acad. Sci. U. S. A. 96, 493-498). We now show that addition of a synthetic peptide corresponding to the entire third intracellular loop (3i) of the LH/CG R completely and specifically reverses desensitization of AC activity, with an ED50 of 10 microM but does not modulate basal, hCG-stimulated, or forskolin-stimulated AC activities. beta-Arrestin binds selectively to the 3i peptide coupled to activated Sepharose. Desensitization of LH/CG R-stimulated AC activity is rescued when the 3i peptide is preincubated with exogenous beta-arrestin. These results show that endogenous beta-arrestin participates in cell-free desensitization of agonist-dependent LH/CG R-stimulated AC activity in follicular membranes by interacting directly with the 3i loop of the receptor, thereby preventing Gs activation.